I can't see the Wii ever being able to exceed the capabilities of the Xbox by much. The hardware is very similar afaik so it won't be able to emulate newer machines than the Xbox can (maybe the Saturn) and I can't ever see it being able to playback hd either. I hope I'm wrong, it'll be nice to mod my Wii in the same way I have my Xbox. If someone or a team of people manage to mod the 360 or PS3 so we can gain full control of the systems hardware then we'll definitely have something awesome on our hands.
EDIT: On topic, that handheld system looks nice. Especially for the price.