If we're to assume that N5 comes out in late 2005, and knowing that Nintendo made some early dents in the N5 game development process so far, it's safe to assume they can have some solid titles ready in 2 year's time. They may not have actual hardware to work on, but surely they have an idea of what kind of performance to expect, so early work must be well on its way. Over 2 years of prep doesn't sound like a rush. 3rd parties will work at a disadvantage, but what else is new.
I think it's definitely a good idea to launch within a few months of the competition. They don't have to be first, just timely. Since it looks like the PS3 will be hitting in late 2005, it will be the holiday shopping season that'll be more important, not who beats who to market. Just get it to market before Black Friday, and you're golden.