Well there's nothing wrong with trying to keep up with Sony and Microsoft. Personally I think a big reason why the Gamecube isn't selling so hot is because Nintendo doesn't keep up with the competition enough and always does everything their own way. Nintendo would probably be in a better position right now if they made sure to match the competition in all areas while at the same time bringing new innovation to the industry (like the Wavebird and GC/GBA connection).
Demo discs are a GREAT idea because they let gamers try out a game before it even comes out. Plus by releasing several demos on one disc then it exposes the customer to a wider range of games. Someone who buys the Cube demo disc for Soul Calibur 2 will get exposed to Viewtiful Joe and Billy Hatcher which they might not have been interested in before. I too think that Nintendo should have released these since launch. With a disc format there's absolutely no reason not to. I think the fact that Nintendo took this long to release one (and flubbed it by designing it only to come with a Cube purchase) shows how ridiculously out of touch they are with today's market. They should be releasing demo discs with at least every second issue of Nintendo Power.
All these little things like no demo discs until now, Player's Choice titles that cost ten dollars more than the competitions, smaller memory cards, no DVD playback, no announced online plans, etc are what is ultimately hurting Gamecube sales. By themselves none of these are that big of a deal but when you combine all of them the Cube starts to look rather inferior to the casual gamer.