That remains to be seen, I think. They certainly aren't pushing the DSi as any sort of successor, seeing as the only exclusive games for it are tiny ones on the download service, which are only exclusive to the DSi because of how they are distributed rather than because the DS couldn't handle them.
Even the Game Boy Color was a more significant hardware upgrade than the DSi is to the DS.
Seems like another case of Wii vs. GameCube. Any Wii game which doesn't use Wii controls, Miis, or online features is no different than a GameCube game. Any DSi game which doesn't use the camera or SD card slot is no different than a DS game.
So, yeah, I guess we'll see what it can do, but all I'm expecting is games with very slightly improved graphics which exist only to get people to buy the same system again.