MS Merger with Nintendo, Nintendo fans would get:
-More Sega support, Nintendo guys would get thier 2ks back
-Online gaming
-Rare back home
-Halo, along side a whole slew of popular mature games, and *gasp* some exclusive fighting and racing games... and even some RPGs?!?!
I think them coming together would be just fine
As for Xantar's post, I think that they would still use every resource they have until they pass the other guy they are competing with... Sony. It's not just Nintendo and MS in this gen, if one were far enough ahead of the other, it wouldn't be relax time, they would have to work even harder to top Sony.
If anything the delays would be for the good, no more rushed games. Games that are good but not marketable (in Nintendo's current state) could get a huge push from MS, and MS could stop putting so much money behing marketing half assed games.