How does that not make any sense? Nintendo is constantly modifying consoles in development. Here's the rumor about Nintendo tweaking the Wii U,
and here is an interview with NintendoEnthusiast.
It's still a rumor, but it's very likely to be true, because Unreal Engine 4 is the future of next-gen gaming. It would be foolish of them not to support it, because then third parties would drop their support and it would become a flop like the Wii. Mark Rein of Epic Games says that he's also confident in the Wii U,
making that rumor seem even more likely to be true.
They need to keep the price point low, and to do so, they're going to take losses.
Still, I don't think it's time to talk about the Wii U's capabilities as there is very little known about them. I would be surprised if the final product is only slightly more powerful than the seventh generation. It would really defeat their purpose of wanting to bring back the core gaming audience to their system, because like you said earlier, people would just stick with their PS3/XBOX 360, and then buy Microsoft or Sony's next gen home console.
This is all just speculation, so we'll have to wait until E3 to see what the system is really capable of.