So, you're off on your hardware specs --
The Wii uses a single-core, 32bit IBM PowerPC (a derivitive of the G3 in the original iMacs, with added MMX-like 2-wide vector operations) -- its the same thing they used in the gamecube, just 50% faster and with some minor architectural improvements.
The PS3 and Xbox use 64bit IBM PowerPC cores, but they are not a derivative of the 970 (aka G5) or any of the other big-iron PPC chips. These cores are essentially a PowerPC ISA equivilent to Intel's Atom processor (64bit, in-order, hyperthreading), albeit the console processors (at 3.2Ghz) have twice the clock speed of a typical Atom core. The Xbox 360 has 3 of these dual-threaded cores each with an enhanced altivec unit with an extended register file (128 registers instead of the usual 32) and a few special instructions thrown in (horizontal add, which is handy for dot products for instance) all of which share an L3 cache. The PS3 has only one of these dual-threaded cores, with a bog-standard altivec unit, but offloads a lot of the heavy-lifting to the SPE array (7 DSP-like processors).
The current rumors suggest that Nintendo will be sticking to a PowerPC CPU in their next system -- rumors are consistent with a derivitive of the same Atom-like PPC cores in the 360 and PS3, but could be higher-clocked, or something else entirely, and with much-updated graphics, surpassing the PS3 and 360.
My view is that ARM actually is a contender for the next gen Nintendo console -- given the relatively-weak Wii processor, several off-the-shelf ARM cores would provide Nintendo with a substantial upgrade in CPU power -- likewise, since the 360 and PS3 are *not* running 970s, a fast 2-4 core ARM processor would be fairly competetive with those platforms, CPU wise. The downside of ARM (specifically compared to PPC) is that ARM's Neon SIMD ISA is terribly limited compared to Altivec (which is nicer than even SSE), and also that no off-the-shelf SOC has graphics prowess that would compete with, much less out-do, either the PS3 or 360 (Though SOCs from even 18 months back could give the Wii a run for its money, and offer more-flexible shading.) What Nintendo would *gain* by going to ARM on their home consoles is to consolidate their technology around one ISA, which would allow them the focus their efforts with regard to their toolchain, libraries, and developer support, while also giving them a very easy path for their portables (just make their last home console portable, literally -- which they basically do in terms of capability now, but not in terms of architecture.) I don't know that Nintendo will go this route, but its what I would do in their shoes.