The reason why they are selling so many 1st party titles is becse there is hardly any quality 3rd party games on GC
One of the reasons Nintendo has problems with third party developers is because of the strength of there own games. Its hard for a third party to live up the what Nintendo create themselves.
As for Sony now being a better game developer/publisher then Nintendo:
Games developed/publish by Sony since PS2's release (using GameRankings average review scores):
Gran Turismo 3 = 94%
ICO = 91%
Twisted Metal Black = 90.4%
Jak & Daxter = 89%
Ratchet and Clank = 89%
Sly Cooper And The Thievius Raccoonus = 87%
Hot Shots Golf 3 = 87%
SOCOM - US Navy Seals = 86%
Frequency = 84.5%
War of the Monsters = 83%
The Mark of Kri = 82%
Dark Cloud = 77.8%
Kinetica = 77%
The Getaway = 76%
PaRappa the Rapper 2 = 68%
15 games with an average score of 84.1%
If I missed any then just tell me as I've only used the games mentioned in this thread for Sony, because I don't know any better
Some (ones I can remember) of the games developed/published by Nintendo in the same time period (using GameRankings average review scores):
Metroid Prime = 96.7%
Legend of Zelda: A Link to the Past = 96.1%
Legend of Zelda: The Wind Waker = 95.8%
Legend of Zelda: Majora's Mask = 93.4%
Metroid Fusion = 93.2%
Advance Wars = 92.9%
Legend of Zelda: Oracle of Ages = 92%
Legend of Zelda: Oracle of Seasons = 92%
Pokemon Gold = 92%
Pokemon Silver = 92%
Super Mario World: Super Mario Advance 2 = 92%
Super Mario Sunshine = 91.7%
Yoshi's Island: Super Mario Advance 3 = 91.5%
Mario Kart Super Circuit = 91.4%
Conker's Bad Fur Day = 90.8%
Golden Sun = 90.6%
Golden Sun 2 = 90%
Eternal Darkness = 89.5%
Banjo-Tooie = 89.5%
Animal Crossing = 89.3%
Pikmin = 86.7%
F-Zero: Maximum Velocity = 85.1%
Wario Land 4 = 84%
Pokemon Puzzle League = 83%
Wave Race: Blue Storm = 81.6%
Star Fox Adventures = 80.3%
Luigi's Mansion = 80.1%
27 games with an average score of 89.7%
Again tell me if I missed any (I know I deffinately missed some).
Sony are doing quite well here, but they're not at Nintendo's level in this area, nobody is.