I'm glad you softened your wording on Iwata in subsequent posts. Earlier just read as dickish.
Given the moves both Sony and MS made with this generation of hardware (not really going for expensive and powerful) I can safely say you're probably closer than you think about Nintendo re-entering a part of the hardware race. Getting close to (in a brute power sense) should be significantly cheaper than it has been for them in two generations. A position not entirely dissimilar to the one they found themselves in with both the SNES, and N64. Releasing direct competition, years later, with competitive hardware (maybe an advantage/disadvantage here or there).
But you have to remember, even their "competitive hardware" tends to have some big disadvantages. The storage mediums of the N64 and GCN, the CPU of the SNES, the main memory of the GCN, the tiny texture mem of the N64.
I could see it releasing with a GPU on par with One, a higher clocked CPU than both, and a main memory pool of 8 gigs GDDR3 clocked at 800MHz. Because... Nintendo.