It would be great for certain area's of the country. Where it gets extreme cold weathers, or rains so often recess out side is not much of an option. The Wii now has games that requires quite a lot of physical exertions.
Video games also increase a few other skills, such as instant brain process and reaction to situation, strategy. Etc. I know there are other ways to learn this but video games are another source that I personally don't have a problem with.
If the only reason the kids would be inside is because of weather restrictions, I'd have no problem with the Wii. I don't have one at home, because we don't "do" video games (we'd rather play tennis than pretend to play tennis, for example, and we live in a climate where we can play 10 months out of the year). But my kids' school has a Wii in the media center that they are allowed to play if they turn in a reading incentive sheet a couple times a year. My girls go at recess now and then, play a Wii game, and get it out of their systems.
My concern would be that the Wii is replacing recess outdoors. As a teacher, I can assure you that kids need a mental and physical break from the classroom, and they need to be outside in the fresh air as well. If they can't go out due to weather concerns, chances are they're sitting in a classroom watching a movie on the DVD player or SmartBoard, anyway. So in that instance, the Wii might be better than the alternative.
But no, I don't think Wii is a good recess activity. I'm with you. Besides, let's be honest: most kids have them at home. Do they need to play them at school, too? There is no skill that they NEED to replace recess with!