You are correct. The graphics are not next gen at all. What makes the wii next gen is the motion controls. I think to be next gen you have to bring something new to the gaming world and this is what Nintendo choose. If the controls do not catch on then the wii will not survive.
I personally think Nintendo could have guaranteed there place if they upped the graphics to something even close to the xbox 360 and PS3. They should have at least went 720p with 1GB processor and a better GPU. This would not have upped the price that much.
With what the wii has I do not think the graphics will get much better then RE4 graphics.
They better make the controller count is all I have to say.