http://lostgarden.com/2005/09/nintendos-genre-innovation-strategy.html
Obviously Sony and Microsoft have a foothold on the more casual side of gaming. Nintendo is therefore aiming for a different market: those not sold on gaming.
A common complaint with those who haven't been playing video games for years on end is that controllers are too confusing, with too many buttons and no easy way to get accustomed to it. This controller is noticeably more simple, lessening the buttons and probably making it easier for anyone to get into it.
Nintendo have made every innovation in controllers for just about every feature: shoulder buttons, trigger buttons, rumble, analog stick, wireless, hell, even the d-pad. Gamecube shaped up to be a transition to revolution: the bigger A button emphasized a shift towards simpler play control (though it made many games harder to play), where more things could be done with less buttons. This transition leads to Revolution where potentially everything lies in a lesser amount of buttons, relying more on actions and other methods of control.
Also concerning graphics, the Revolution's technology has not been solidified yet, and its abilities are not yet fully shown. It's not the paint you use to make a painting, it's how you use it.
An all-in-one media center is nice, but I would prefer to purchase DVD players and such separately so that I decide what features are in the player, not my console system maker.