First of all, let's not forget that this generation is the first time ever that Nintendo hasn't had the best graphics. The NES was way better than the Atari(s) and the Master System, the SNES was better than the Genesis, the N64 was better than the PS1, the GCN was better than the PS2 and always neck-and-neck with the Xbox, often better than it -- despite coming out earlier than it. So when you try to frame Nintendo as being nothing but a bunch of backwards technologically illiterate hicks who have never given a [darn] about graphics, you're completely ignoring the last quarter century. That does describe their handheld systems, to a certain extent -- the Game Boys always sacrificed graphics in exchange for portability (form factor and battery life) -- but pretty much everyone agrees that they rarely made a misstep there, and the fun of the games was always there.
Also, I find it a bit hard to swallow that the console that's been using the same SNES controller since 1995 is the one that's making progress.
I don't see Natal being any less gimmicky or better controlled than the PS2 version of the EyeToy. And I've yet to see any actual games for it. So far I've seen some kinda Tamagotchi with a 12-year-old boy in it and a generic racing game. You gotta do better than that. Especially since that little boy game, the defacto flagship game, is made by Molyneaux, who has never failed to disappoint when it comes to releasing games that live up to their ridiculously overblown expectations (I fell for the hype on The Movies; I'm not getting fooled again). Sony's thing is impressive, but I've not yet seen it do anything that you couldn't do with two WM+s and no camera and certainly no silly glowing ping-pong balls... and without waiting a year for the technology to materialize.
Nintendo will not be losing any significant portion of its audience to Microsoft and Sony. As far as I can tell, the WM+ offers just as much precision in control as the EyeToy / Ball Wand / Whatever system (and way more than Natal, seeing as it has, you know, BUTTONS -- the lack of which on the Wiimote I remember hearing people complain quite a bit about not too long ago), and it's out now rather than some nebulous time next year, and it's a completely unobtrusive and natural-looking add-on to the controller everyone's gotten used to for the last three years rather than something completely new and unrelated coming out of nowhere (making it much more likely to be supported in actual games and not just tech demos to catch the headlines), and it's cheaper (only $20 if you only need one, $80 if you need four, which will probably still be cheaper than either Natal or a full set of EyeToy Ball Wands).
The individual "gimmick" of motion control will lose its novelty by next generation, but again, you're acting like Nintendo's only existed for the last three years. Look at the last quarter century and all the control "gimmicks" Nintendo's introduced that everyone else has followed them on. Analog stick. Shoulder buttons. D-pad. The very concept of a horizontal controller you hold with both hands and control with your thumbs. Every major innovation in controllers in the last 26 years (and even further back than that if you count the Game & Watch games) has come from Nintendo, and the others have always just played catch-up. And that's not even getting into the number of genres they've created. They'll have something new, don't worry.
Is the issue really the perceived fewer "hardcore" (KIRBY **** YEAH!!) games (three main series Mario games, two Zeldas, a new Metroid Prime and remakes of the other two, the biggest Smash Bros ever, and only one Mario Party -- that's certainly above average for a Nintendo console barely halfway through its lifespan) and the lack of third-party support (name one Nintendo console where third-party games are the big draw -- that means not just one or two standouts from a couple of parties, but the amount that people are demanding from the Wii now), or is the issue just that there's a bunch of games you don't want to play that also exist? I think it's that the existence of shovelware somehow threatens your manhood on some level. You're not comfortable knowing that you're playing a console that can also play Ninjabread Man and want Nintendo to stage an inquisition and purge out all the impure games. You want to go back to the days where Nintendo only gave their Seal of Quality to good games (read: the kind of games you like), like in the NES days, right? Except... most NES games sucked. Seriously, go back and look some time. Yes, it had some of the best games ever, but if you take all the games it had into consideration, the great games, even the decent ones, were by far the exception rather than the rule. For every Punch-Out, there were twenty Sunday Fundays and Urban Champions Wizards and Warriorses and Donkey Kong Jr. Maths and Jekyll and Hydes and Deadly Towerses. Most NES games were cheap shovelware (the Seal of Quality did subdue it a little bit, mainly through censorship, but it was mostly a marketing gimmick), and it still had some of the best games of all time. Ditto with the Wii.
Meh. I didn't want to make this post, but I couldn't hold back anymore. You have some good points, but you're blowing things way out of proportion and don't seem to be giving history enough consideration. That's the basic point.