Let's address these one at a time...
The hardware is weak, but the market has spoken and to them at least, it doesn't matter. Why would Nintendo spend the extra money when consumers have already decided they're going to buy it in droves anyway? So they can spend more on manufacturing and make less profit? Yes, they wanted easy cash. What responsible company doesn't? It doesn't make any sense to spend a dime more on producing a product than what your customers demand. The limitations of the Switch are the fault of consumers who buy it, not Nintendo's. If Microsoft could sell the same number of units Nintendo can by making a game system that cost $50 to manufacture and ran on 386, you can be damn sure they would too.
All of your other problems are perfectly reasonable, but if you think Microsoft's plan if they buy Nintendo is to drop everything and start porting old titles or working on a new Starfox game, I'm afraid you're going to be disappointed.
They already tried to acquire them once and were laughed out of the meeting.
https://www.engadget.com/microsoft-wanted-to-buy-nintendo-145746874.html
Sure, buying Nintendo would be a win for Microsoft, but Nintendo would gain absolutely nothing from the deal. Sure, there are people like myself who loudly and rightfully complain about Nintendo's business practices, but at the end of the day, it took until THIS year for Playstation 5 to finally outsell them in a single year, and they're not even CLOSE to matching total unit sales, and Xbox is doing worse than THAT. Add to that Nintendo's software attach rate, and as much as I don't like HOW they do their business, they're WILDLY successful at it and making more money as a function of their costs than anyone else in the industry, so they can't be faulted for continuing to do what is working.
I honestly don't know what Phil Spencer thinks would be different than the previous meeting in another sales proposal today, especially given Microsoft's INCREDIBLY weakened industry market position compared to Nintendo's. Microsoft is only able to approach the idea from a position of power based on its market capitalization funded by its other businesses - in the gaming industry, Nintendo simply occupies the more advantageous market position.
I agree with you that it's moving away, and it's unlikely we're ever going to see that world come back.
But that's not going to stop me from old man ranting about it every chance I get.
Thanks for humoring me this long.