I just think Apple's too out of touch with regard to pricing to be successful in such a competitive market. They have an advantage in their other areas, where they deliver a product that at least appears far superior. They know people will pay extra for style so they can get away with charging $1300 for a MacBook that has the same stats as a $900 Dell, or $300 for an iPod that is similar to a $200 MP3 player from another company. But Nintendo already has the "slim, white, stylish" console... what could Apple possibly bring to the table? It might be as stylish as the Wii, but it won't have the motion controls, and I doubt it'll cost any less. No one will have any reason to buy one.
With game consoles, though, the real important thing isn't the console itself, it's the games. Last I checked, Apple wasn't a huge game developer, nor did they have many ties to major game developers. Besides, I don't think the market can stand another console. Like I said, Nintendo already occupies the space that Apple would occupy if they were to try to go for a full-on game console.
One thing Apple could do, though, is try to capitalize on the extreme popularity of Pop-Cap's casual games. Maybe try to work out something for the iPhone or even some sort of AppleTV integration where you control the game using the remote and buy games through the iTunes store just like with iPod games. Either that, or if they do want to make a standalone console, they could make one exclusively for casual games and use really cheap hardware to undercut Nintendo. But Apple releasing any piece of hardware for under $200 seems kind of outlandish to me.