It was a strategical decision, I guess. Motto: If you can't beat them, buy them. M$ tries to find a dominant place in the market for the Xbox before Sonys PS3 comes out. Most of all the M$ Management tried to benefit from the video gaming experience of Nintendo.
As for the "bad guys" at M$: I think it is far too romantic dividing the world into good and evil or black and white. These people just do their job like all other capitalists do. It's predictable: business=business=business... sad but true.
