1.) AR is too expensive to implement
This is a common misconception. AR is not necessarily an expensive technology. There´s two types of AR, depending on whether images are projected onto a screen or onto a head mounted display (HMD). We are talking about the latter, here. It´s been around for ages and found a number of niche market applications, such as in the army or medical fields. Sure, if you go out and buy an HMD for your PC it will set you back a four-figure sum (at places like TekGear, for instance). These are high quality tools, most likely used by professionals only. A consumer product that aims for a mass market, however, need not be so expensive.
Read the following quote from this 2002 Chicago Tribune article, mirrored on a manufacturer´s website:
Stryker Instruments of Kalamazoo, Mich., is working on an augmented reality system for orthopedic surgeons, where the doctor sees an X-ray image of a bone superimposed on his view of it. In less-technical terms, the system could be described as X-ray vision glasses.
Stryker's see-through head-mounted display is made by Microvision Inc. of Bothell, Wash. Its president, Rick Rutkowski, said the firm is working on a version that bounces colored light beams off a tiny, vibrating mirror onto the inside of the user's glasses. Scanning back and forth, the beam forms a full-color image with the resolution of a computer display, with brightness adjusted to contrast with the background. The display could even have a bifocal arrangement, with the user looking down to read the screen and up to see the landscape, he said.
The units should resemble ordinary glasses. Prototypes are already being tested. "We expect to see low-cost production in 2004, with an end-user price around $100," he said.
Imagine what adding a bulk order in the numbers Nintendo would be interested in could do to that price.
Further, the Gartner group apparently estimated that "by 2014, more than 30 percent of mobile workers will be using augmented reality."
2.) AR is not a controller
Sure, AR needs to be complemented by a controller. This is commonly a gyroscopic device. Tiger Telematics also opted for this double solution in designing their Gizmondo (see this press release in PDF format.) So, yeah. A gyroscopic controller would have to go along with an AR visor or goggles. But I need not remind you people of the Nintendo / Gyration connection. Or do I?
3.) An AR visor / goggles would be too big
This contention can be easily shrugged off. AR works with goggles, no bigger than ordinary glasses, see the article quote above and my links to some AR projects below. Check the videos, AR goggles can be as light and tiny as you want.