At the moment Nintendo is catering for Nintendo fans, and that is no way to grow marketshare. Sure, you'll sell a few more copies to those who already own your console, but you won't expand your install base. People who like Mario enough to buy a game because he's in it own a Nintendo console already. Frankly, that's all there is to it as far as I'm concerned. Nintendo can either continue with their niche in the market (I'm talking GC here) or try an capture back some of the ground they've lost; they seem to have chose the former, rather than the latter.
Say what you will about Sony, but they have been the innovators this generation. Eyetoy and Singstar have been MASSIVE hits for them, especially in PAL territories. They have used brand new control mechanisms, didn't rely on an already established franchise, and have been, once again, huge hits. Why? Because they extend past the usual gamer. The sort of thing Nintendo has been talking about, but so far hasn't really pulled off. Mario isn't going to make new gamers, but that sort of thing is, and it's disappointing to see Nintendo be following, rather than leading in this case (and not to mention following in another Mario spin-off). Sony has captured new gamers; Nintendo hasn't (at least not en masse).
By the way, the worst example we've seen of this existing franchise mentality, when Miyamoto demanded Dinosaur Planet become Star Fox Adventures; I doubt it sold many (if any) Gamecubes, and made a bit of a mess in an otherwise solid game.