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I don't know. They're not making any money off those games now (except for the very occasional highly popular ones that they port to the GBA).

The classics collection idea isn't totally dead however. You can still get old game collections and somebody must be buying them otherwise they wouldn't bother releasing them. Xbox Live Arcade for one. I think they're doing a pay-per-download model as well.

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Putting all those games online for free would be a big draw for the hardcore console gamers, I think, and that's an area where Nintendo has lost a lot of ground. If they can get more Nintendo consoles in the diehards houses, then that's that many more games they have the opportunity to sell.

Yeah. Nintendo don't have particularly good penetration into the diehard market at the moment. Aiming at them is probably better anyway since they're usually the ones with the most money to blow on games.

The handhelds market is being eroded by the Sony PSP now when before they were undisputed leaders. It was pretty much a monopoly since all the other handhelds just died a quick death when trying to go against the Gameboy of any generation. Will be interesting to see how Nintendo and Sony fare. I've got a personal bias towards Sony but thats because I've now got a PSP

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Also, porting games to a new system costs a lot of money, I would imagine, for each game. But if they put some emulation in the console itself, that's pretty much a one-time development cost. (And it's vaguely possible that they ported some preexisting open-source emulator, reducing their costs that much further.)

It is most probable that they're using an emulator of some kind instead of reimplementing the games from scratch which really would take a lot of money. The emulator is probably a downloadable element instead of being integrated with the console itself. Porting these types of emulators isn't hard due to the low resource requirements.

Homebrew programmers have managed to port a whole bunch of emulators to the v1.0 PSP already.