I find this statement to be slightly ridiculous. How is Nintendo "pulling the plug" on the Virtual Console service?
Perhaps that was the improper term. However, Nintendo's support for the service has indisputedly withered; whereas we once received multiple VC games per week, we're averaging, what, a game a month this year?* Despite the hundreds, if not thousands, of eligible titles not on the service it's become almost surprising to find any VC title listed on any given week. The quality's there, but the quantity is not. As to the rest of the post...
*I just checked: we've had 18 releases in 2010, so about 3/month. That's better than I thought, so I may have to retract my comments.
I think VC releases were going to taper off a bit no matter what. There is a finite amount of games that can be released on it. Eventually Nintendo would run out of old games. They might feel that having no new titles appearing on it would hurt it so they're stretching out the releases.
Nintendo probably also sees WiiWare and the VC as the same thing in that it is just downloadable content. They want new content every week but they don't care what content that is, whether it be WiiWare or VC. So they might as well save VC releases for weeks when there isn't much or any new WiiWare content. From a marketing perspective they want to have something coming out each week.
The inconsistency here is that Nintendo's Japanese VC releases already dwarf those of NoA or NoE, but despite that Japan (to the best of my knowledge) is continuing to receive a steady diet of new VC games, in addition to the WiiWare and DSiWare games. If there was uniformity across the regions I'd be inclined to agree, but this is demonstrably not the case.
Also I know this happened in the past but when a big retail game comes out the VC and Wiiware offerings are slimmed down.
How many people picked up Sin and Punishment 2? It was released this past week.
Also the Pearl Harbor Wiiware game came out today and everybody was raving about the title pre launch.
The idea that VC and WiiWare are used to supplement the retail schedule had merit, but it's not consistent with Nintendo's behavior: the Wii had some noticeable gaps in its retail schedule over the past 18 months, including January and February of this year, but as far as I can remember the biggest WiiWare/VC month was in March (Cave Story, Max & Magic Marker, Ogre Battle 64, Mega Man 10, Rage of the Gladiator, Rondo of Blood, etc.) which was the same month we received Red Steel 2, i.e. the biggest retail release pre-Galaxy 2. If this idea was true, these releases should have been more spread out rather than clustered like this.