Games don't need to be played on powerful systems to be performant, pretty, and fun.
Man, I'm sick of that argument. Nintendo fans has been saying that for over 15 years now, and it's still just as silly as it was back when Nintendo basically gave up trying to compete with Sony.
Yes, you can still have fun with an old Pong console from 1977. But if you release it to compete with modern consoles, no one is going to pay $300 for it.
The core demographic of Nintendo lines are not children, they are families and 20-somethings that aren't into whatever the latest Call of Duty is.
No, their core demographics are kids and nostalgic adults who won't grow up.
It is important when discussing poignant points like you have presented that we understand that Nintendo sells most of their consoles at a profit while Xbox and Playstation have largely been subsidized, and yet Nintendo still sells.
Actually, from what I understand that hasn't been true for several years now. They've been losing money on the WiiU from the get-go. The 3DS and a big bankroll they had saved up has basically been keeping them afloat.