The very little we know about the Revolution is that it is rumored to be in a similar performance class as the X2. The big difference is MS will be eating high end losses in 2005. If the average production cost of X2 is $400 in 2005, but gets down to $300 in 2006, that means Nintendo could launch a similar speced hardware and take very little losses (even come in cheaper?) or Nintendo could use the wiggle room to either (a) put beefier components in or (b) go with extra stuff under the hood.
This plays well into a VR type idea. While a VR HMD (goggles + headtracking) would have 2 expensive LCDs (800x600?), LCD costs are going to drop FAST between now and then, and will continue to drop well into the Rev lifetime. We are expecting a 20-30% drop on LCD screens this year alone, I would think that two 800x600 displays would be "affordable" by fall 2006, and by the time mass sales are done in 2007/2008 they should be fairly cheap. So longterm cost would not be a huge factor.
But why?
While I sincerely doubt Nintendo will do this, I think VR HMD plays very well into their core concepts:
1) Easier use
2) Appeal to new markets that their competitors are not targetting
3) "Revolutionary" new gameplay for the home console
4) To spur creativity within the development community
VR HMD hits every one of these. Sure, it will alienate SOME gamers, but they already do that. But what they would do is open the door to a lot of casual gamers and enthusiests who right now are looking elsewhere.
Personally, I think it could make gaming a lot easier and much more immersive. RE4 would be totally creepy. MP would have a much stronger sense of investigation as you look around corners and such. There is just something about moving your head and your POV changing linearly with it.
And ease of use would be a big plus. Consoles only have so many buttons. Most FPS on consoles do not allow you to peak around a corner. Tilting your head makes this difficult task seamless. How many here have good aim with a dual stick joystick? Would it not be easier to LOOK at your target and just push a fire button? And a VR HMD would also allow a microphone to be easilly installed. Give orders and voice commands instead of pushing buttons. I can see how a VR HMD could make almost any game (FPS, Adventure, RTS!!!, Sports, RACING!!!, etc...) games not only easier to use, but also more immersive. Sure, some of you will hate it, but I think it would have more fans than enemies. And it is not like Nintendo has never tried the idea of VR before... but that was before the time of cheap/high quality/LIGHT LCDS. Now you can have a light goggle setup with a microphone, 5.1 headphones, and quality LCDs all in a light package.
Still, I will be shocked at VR. It would be affordable enough, and it would be revolutionary and meets most of Nintendo's ideals. But I think it would be a huge risk that they would be unwilling to do. But if Nintendo did it I would pick up a Rev on launch day.