We are assuming IRIS wouldn't have had a touch screen, right? Because with a touch screen, every blue ocean game released on DS would have mostly worked.
Without a touch screen, and thus without the blue ocean audience... Idk, IRIS would have been a de-facto poor man's PSP. Everything IRIS could have done, the PSP would have done better. Mario and Zelda were also in a relative decline in the early 00s and I feel NSMB and Phantom Hourglass (and on Wii, Twilight Princess and NSMB Wii) owe their success, in part, to the new audience brought in by the blue ocean games and the fact the DS was a cool device to have.
Pokémon games would have saved the ship, but at this point Nintendo would have become heavily dependent on the Pokémon franchise. It was never said explicitly, but I think one of the points Iwata wanted to achieve with the DS was creating an appealing line-up even without factoring in the Pokémon games -- on GBA, Nintendo sold 90 million units of software... of which 35 million units were Pokémon games. This is not very healthy.
Additionally, without the confidence gained with the DS, Nintendo would have never released the Wii and they would have been crushed hard by Microsoft and Sony.
Ultimately, I think going down this traditional route would have either turned Nintendo in a company focused in retro-inspired games and the Pokémon franchise (which is... depressing, really) or only delayed a Wii/DS-like device, as
@GamerJM said (though I think they would have focused on the handheld market).