I'm not sure it went "wrong" per se - there are just a lot of people who were very "anti-Nintendo", and, seeing something that they ignorantly felt would "poison" their "elite" hobby with the common man, the used it as fuel for a big ignorant fire of rage. And, as these people were the ones in the limelight, people listened to them and conformed until they honestly beleived it too.
This is what happened to the prequel trilogy - everyone, whether they liked EP1 or not, conformed until they beleived it - and then that warped their perception of the next two.
But, to be frank, Nintendo does need to police game quality more - but I suppose we, as the "real" gamers, must identify good things and bad things.
Also, NIntendo keeps its old franchises because hipocrites look at a new, zany franchise, and, no matter what the game quality is, drop it like a sack of flaming dog doo, screaming "It's new and fresh and I don't understand it, and it looks cute so it must be for kids - it's baaaaaaad and eeeevil and must die!". Pretty much what happened with Pikmin and Chibi-Robo. Sniff.