Well, we have to remember that this system won't support HD. Some of the extra power the other systems have is used for running the games at a higher resolution. If they don't have to get the games running smoothly enough in 720p or higher, they could still have decent graphics.
That said, I'm still a little concerned when it comes to third party development, mainly with ports. If they make games that have to be watered down graphically for the Nintendo system (not just in pixel resolution but also in things like polygon counts, texture quality, and effects), it could really affect sales and thus hurt the system.