I don't think Miyamoto ever said SS would be the last game if not successful.
Mario Kart is a casual series, anybody can pick it up and play. Zelda is not a casual series. The series has NOT gone down in popularity. Yes there are more people playing games, but not all like the same games. There are many people who play ONLY sports games, or who only play fitness games, etc. And Nintendo is more careful with licensing, you don't think they could have a Zelda cereal and TV show if they wanted to? They are not saturating the franchise and milking it to death. The series is still popular, even more so now.
To me, your argument is like saying "why are TV shows getting more viewers now than they were 30 years ago even though millions more people watch TV". It's because there are more choices for people to watch and not everyone likes the same shows. Yes more people are playing games, but there are far more games to choose from (there used to be like 400 games released a year in the mid-90s, now there are well over 1,000 each year), and many more types of gamers.