Even if the full UEngine 4 can't run on it, keep in mind that engines are made to be bumped down. There are still UEngine 3 games that run on the Wii currently, and as far as the UEngine 4 goes, thus far it's just adding fancy lighting and particle effects and some more texturing. Which unless you're a graphics enthusiast, isn't that big of a deal o3o
And to add, Nintendo really has just two options right now. Get their heads in the game and blow out the competition, or pull them selves out of the competition entirely as a major developer and either A.) Produce consoles and games casually, cheap and affordable. or B.) Go the way of Sega and just bank on their popular titles of games, such as Mario.
There's really no shame in them producing games for Sony or Microsoft, for their consoles, as long as they are given the full freedom to do what they want with the games. Not to mention, they can still make motion software games, and they've proven they succeeded a bit more in that area to begin with. Look at Sega. They were totally beat out by Sony, but as soon as they stopped making consoles, they started making games for the Playstation.