They shouldnt've gone HD. They looked at the competition and saw 3 consecutive HD consoles losing between 4 and 6 billion dollars each, and said, we want in on that. Brilliant.
They shouldve doubled down with the Wii, which was doing fine before they pulled support. With that marketshare they couldve waited as long as 2-3 years after the launch of the PS4/Xbox to launch something. The PS2 peaked in 2002 and dropped every year from then on out. Nintendo saw the same year over year drop and got scared.
SD wouldve likely allowed easier 2+ screen support, as you're trasmitting dramatically less information. It wouldve allowed a lower price point. The competition would have no chance to co-opt it as it would be a mid-cycle launch.
Now that they've made their bed, theres not much they can do. PS3 showed us that the damage done by a high price point isnt entirely remedied just by dropping the price. Nintendo has a robust enough development team(s) that they may able to make it look look a little better than the previous 3 HD consoles, but this is a low, low bar for Nintendo to have sunk. Hopefully they achieve Miyamoto's goal of completely divorcing video games from the TV soon, because their future in traditional home consoles looks bleak.