My belief is that the next major step is Thought Controlled Gaming.
I think Nintendo will do that with it's next console, in about 6-7 years.
As for the next hand held, there's some decent rumors of an even slimmer version of the DS comming in a couple years (With the loss of the GBA port). Don't expect to see an actual new hand held till around 2015. I could be wrong, but really, they didn't make any upgrades beyond graphics to the Game Boy until the GBA, so I doubt they will move on from the DS for quite a while.
Note, here's my Nostradamus moment. Wii is this generation, the Wii's successor is the next generation. I think that the generation AFTER THAT will be full immersion mental interface gaming. To get an idea of what I mean, think about net running from Gibson's Neuromancer series of books, or the neural implant computers from Peter F. Hamilton's Night's Dawn Trilogy.
In essence, an interface and processor system is implanted into the brain, with access sockets behind the ears, allowing you to perpetually access the system, and experience full sensory immersion into both prerecorded and interactive media. It's all in your head, but you see and hear and feel everything like it's real. Or, you know, toned down as appropriate, because you don't REALLY want to feel it when you stumble into the lava pool.
Anyway, That's what I expect to see, by 2020.