Yeah, we're looking at a crash. It may not be as total as the 1983 crash, but the market can't exist at the level of shovelware being pushed.
How exactly is that? Too much shovelware and the gaming crash dragon gets woken up and destroys the bank accounts of game makers? The 1983 shovelware-related crash occurred because the entire market was casual gamers. It would have been hard to describe yourself as a serious gamer before the atari. The current casual gaming market could easily crash because of shovelware, mom buys a wii, likes wii sports, buys wii fit, likes it, gets tired of both, buys something like "ninjabread man" hates it as all sane people would, doesn't buy any more games, wii collects dust on the shelf.
Today though, in addition to the casual market, there is a sizeable group of gamers who won't be turned away from shovelware. As long as I've been gaming, there has been shovelware, I'm immune to it because I learned long ago to not buy it in the first place, and in the off chance that I do end up with shovelware, I see it for what it is and realize that not all games are that crappy.
So maybe nintendo will be stung a little by too much shovelware, but I don't see amount of shovelware being capable of crashing the industry this time. If the number of good games stays constant, but you increase the shovelware by a hundredfold, that might strain gamestop, but most of us still aren't going to buy the crap, it won't affect anything.