If the target market is defined as casuals, that do not care that much about graphics and just want the cheap entry level, but fun gaming console, then why would those people buy an upgraded Wii?
The Wii sold a lot of consoles, so I'll assume this target demographic mostly already owns a Wii.
What does the upgrade offer these Wii owners? Better graphics? But we just defined graphics as not important.
The way I see it, the only really important upgrade in graphics is the one that makes it look acceptable on the current standard of fullHD TVs.
And this seems to be a problem while maintaining super cheap.