Carts aren't so cost-prohibitive that they aren't the format for the #1 Video game system this generation and possibly all time. And the DS has the cheapest games too, whereas Disc-games actually went up in price. The customer doesn't care about how much the disc costs the publishers. They care about how much it is costing them.
The real reason carts cost so much back then was because of Nintendo's olde-tyme licensing structures. Most of that has been resolved. And even if it did come down to a $.50 GB Blu-Ray Disc vs. a $2-$4 16-32 GB SD Card/Hologram Card, I think most customers and most gamers would prefer the card, especially if it meant obliterated load times and a durable product, and increased durability of the console. Seriously, who would prefer the load times?
Are SD cards REALLY that cheap for 16-32gb? I'll admit its been awhile since I shopped, but I remember at the stores they cost like $20 for a 2gb and about $39 for a 4gb. Now this was a year or two ago when I went looking and I'm sure those costs have went down and I'm sure the capacities have gone up, but still... Even if a cart cost only $10 each to manufacture (which I think is a reasonable estimate) that's still a very significant chunk of money... its like 25% of the cost of the game on the shelf, and then there's the licensing fees and development costs and advertising costs and so forth.
If 3rd parties have a slim profit margin and then their costs suddenly increase by about $10 that would probably result in them either jumping ship as they did with the N64 or cutting back on development and release only stuff they think is almost certain to do well. This means there won't be as many high-risk experimental sort of games like No More Heroes and so forth.
Chozo Ghost, Nintendo's not releasing Wii2 tomorrow. If you go by roughly halving technology prices, which currently has people buying 8 GB SD Cards in Walmart for $25 retail, in three years time it should be about $4 (assuming no markup.) And remember, these items are retail prices, not wholesale prices. And this assumes them using off the shelf SD Cards and sending buyers to every Walmart. An inexpensive custom 16-32 GB SD card or Holographic card existing in 2011 isn't far fetched at all.
As for third parties support... If they aren't even swayed by the market leader leading the market and having the highest userbase and the most games sold in every market, I don't know what else that can be done. Activision even put up with being screwed out of half a billion dollars just in licensing fees for the PS3. If they are willing to have put up with that abuse, how the hell could Nintendo ever get a leg up? And their costs going up? They seemed to have zero problem doubling their dev budgets and lengthening dev time. What would raising the price of the media from $.50 + Sony Blu-Ray licensing fees to $2-$4 do?
On the plus side it would save Nintendo millions in repairing DREs that just wouldn't happen anymore. Now yeah "Good for Nintendo... and no one else." But I'm seriously questioning the sanity of people who have this weird axe to grind that Nintendo is successful, particularly whiny, excuse-making third parties. Nintendo has probably been the most open they've ever been with them, on both DS and Wii, and BOTH TIMES they ignored them and bet on the wrong horse, to whit all of them have suffered pretty greatly, with even Giants like EA posting Billion Dollar losses during the Holiday period just last year. There has been ample opportunity the entirety of the Wii's life for them to man up and they haven't, allowing Nintendo to dominate yet again, but this time to the tune of Record profits they get little share of. They've had their chance, and they made their choice to marginalize the Wii, motion controls, regular customers, which has led to struggle, heartache, downsizing, and eventual merging or closing.
The best way to make a Nintendo fan for life is to make Barnyard Party and put it on the shelf next to the empty space that Mario Kart Wii is in when it's in stock.