The 360 definitely has the best game library, plus big PC titles coming out in the fall/winter like BioShock and Mass Effect will also be on the 360. But the Wii isn't a bad choice if you skipped over the GameCube era like I did, because there are a lot of good, unheralded GC games and the Wii is backward compatible. Plus, it's less expensive than the 360. I don't think the PS3 is a real option until the platform gets some solid, exlcusive titles, which looks like a long way off.
As for the 360 hardware failure issues, we have three 360s here at THG, and we've never had a problem with the hadware. However, I know plenty of folks in the gaming media that have gon through five or six or more consoles because of the red ring of death. The new MS warranty should protect your investment, but be warned.