Same problem as the Game Boy micro -- releasing revision "M" of old console "X" right as its successor, console "Y" comes out. M removes the backwards compatibility that X had had with previous console W, making it irrelevant considering that Y is backwards compatible with X (but also not W).
However, the micro was a portable system, so it at least had the cool factor going for it. With a home console, it doesn't really matter that it's really small and cool, because it's just stuck under your TV anyway. I own two micros that I bought for about $30 each, because it's cool to have tiny little Game Boys in your pockets. I'd love to have one for every pocket. Can't get that with a tiny home console.
They also missed a huge opportunity by taking out all online capability. In this situation I guess it may make sense, as this model is currently only coming out in Canada and Canada's internet is possibly even worse than America's, but in pretty much any other country, releasing a $99 box that can play Wii games and Netflix (and Youtube and Facebook) could have been pretty big (not to mention Virtual Console games).
Shame there's no SD card slot. A hackable $99 Wii with a tiny form factor would be pretty cool (also, no internet connection would mean no way for Nintendo to disable any hacks with firmware updates). I doubt Nintendo was considering the hacker market, though.
After looking through that review, though, I have to admit that the look of it is actually really growing on me. Of course, with no way to transfer saves to or from it, there'd be no real point in ever owning it, but eh
