It's hard to say whether the Nintendo guys are that inept or whether they're deliberately leaving these gaping holes for the modders.
From some other DailyWTF articles, I get the impression that most video games are written with the implicit assumption that no one will ever see your hideous code -- writing security-related code requires exactly the opposite attitude.
Anecdotal evidence suggests that this is very true. You could probably trigger a gazillion buffer overruns in your average console game. Having worked with Nintendo (library) code, I'd say the lame security isn't intentional either. They've got everything in there, including asynchronous networking libraries that are blocking in error situations.
I was amazed to see the first truly interesting DWTF post since a long time ago....