The last console I purchased was a used SNES for $100. After that it was building PCs; faster hardware/software upgrades and all that. After playing a Wii at a friends house, guess what my wife will be getting for her birthday? Fact is as much as I hated the system concept I love playing the damn thing. And will more then likely end up enjoying the system more the my wife who has begged for one for like 2 years.
The Wii nails its market the novice/casual/family "gamer", hell even my mom wants one, Nintendo knew going in that Sony and MS had an amazing hold on the hardcore/normal gamer. So they developed a system that appealed to an untapped but large market. The drop in profits shows a slow down due to over saturation of the market not the failings of a product line. The price drop to $199 will bolster it's sales to value minded buyers, and skeptics who didn't want to dish out $250 but will consider it at $200.
Q4 will look a lot better trust me.