Maybe not to the extent of full retail releases, but if there wasn't a big enough demand for DLC publishers wouldn't bother. As you said, it's only good for publishers, and given their interest is making money they're not going to bother investing in projects, DLC included, if there's no chance of making money. The revenue might be higher than retail, but these things still cost money to make.
DLC is only going to get bigger and bigger, with more customers using it. I can only hope Nintendo adopts a fair pricing model. I love DLC...in the right context. As in, developers making expansions that are meaty in content and good value for money. DLC, in theory, and in the right execution, is a magnificent way to extend the life and value of your product.
But I'm not sure I trust Nintendo with this. Their pricing model for everything has always been about maximising profits and capitalising on hype and demand. Every console is, relatively, overpriced for the hardware inside (avoiding selling at loss). They're mainline games never drop in price unless they hit a select budget line, because they know they'll keep selling. Their eStore and Wii store prices for games are, by large, much higher than what most of the competition offers.
Nintendo is a company that prices products very high. I fully expect this business policy to transfer across to DLC, and as much as I enjoy their games, I would not be in the least bit surprised to see Nintendo screwing consumers with overpriced crap moreso than anybody else.