Here's another answer summary from the Satoru Iwata Q&A at the Nintendo investor relations site. Actually, this post contains two related questions.

First, does Nintendo's drop in its Wii shipment forecasts from 27.5 million to 26.5 million means that they have a million systems sitting around in storage?

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The answer, explained Iwata, is no, it's not simply a matter of saying that Nintendo at present has remaining stock of a million systems. While Nintendo's monthly output of consoles is, at a high level, pretty much set, it can make adjustments, and the number given is the number of systems that will be shipped out from Nintendo Group by the end of March.

Iwata also admits that Nintendo could have increased Wii system sales had it moved some of the quantities alloted to Japan to overseas markets.

Someone followed up with a question asking if this means final demand for the Wii has dropped.

For the domestic market, responded Iwata, the demand has dropped below the figure Nintendo forecast in October of last year to sell by the end of March. In overseas markets, however, sales are going according to expectations. In October of last year, when making its initial forecast revisions, Nintendo actually had strong expectations for overseas markets, explained Iwata.