*stuff*
*laughs at the age-old favorite line "But
back then it was all about the gameplay, man! We never
cared about production values till the Playstation came along.*
Ah, so nice to see nostalgia alive and well, along with the blind fanboyism and delusion that comes with it. Sorry, but I've owned every Nintendo console except the Virtual Boy, and game design has advanced so far from those early days it's ludicrous to suggest otherwise. We have more choices and more variety in gaming coming from more sources than probably in the history of the industry, catering to a wide range of tastes and interests.
People like to delude themselves with gaming (as with everything else from their childhood) that it was always "better back then" and "more pure", but that doesn't make it so. I certainly remember graphics playing a large role in the SNES vs. Genesis fanboy wars, so I don't know what universe you think it didn't. And you know what the VC is for me? It's a library of games I buy but ironically never get around to playing. I highly doubt I'm the only one with a massive VC backlog, either. The service is "popular" (and if the data we've seen hinted at about the sales on the service is any indication, I'm not sure we can even call it that) because people like the idea of playing old games as comfort food that reminds them of "better days". I'm curious how many people actually play them and still enjoy them the same amount or more now.
As for your comments about Sony "introducing" "shoddy consoles", first off let's be clear on one thing: if it started
anywhere, it started with the PS1 (which was notoriously unreliable) not the PS2.

I work as a tester, and I can tell you that Hardware failure is a consequence of new technology: the more complicated the system, the more things that can go wrong with it. Nintendo has avoided this through extremely conservative hardware specs and less complicated systems. They prefer instead to release inferior versions of their hardware right out of the gate so they can re-release them with minor tweaks for several years. Whatever. I barely play my Wii, and the thing
still broke on me in its first year of use (disc drive failure), so it's not like Nintendo's completely immune to this.
As for your comments about Sony "forcing" various standards on us, guess what: that's how you spur progress in an industry that delights in being sedentary, and it's not like Nintendo is any different. I seem to remember Nintendo "forcing" touch/motion control on us (neither of which I wanted), and they were just as insistent on 3D in the N64 era as any other company (or did you forget their big N64 launch title was a 3D Mario title?). I think overall we turned out just fine.
I could write more, but I'm just about to come off my break so I'll leave it at this: Sony did what Ninten-didn't. They didn't go out of their way to piss of 3rd party developers or the genres they worked in (Yamauchi's infamous comment about RPG gamers being losers comes to mind, given the rising popularity of RPGs at the time), they popularized a storage media (CDs) that lowered development costs across the board, localizations were significantly improved with less censorship, and they pushed for the development of New IPs (and still do) while Nintendo was quite content to stick with the tried and true. We also saw more games make the crossing over to NA from Japan than ever before, though that may or may not have been coincidental alongside the rise of anime in the States.