Why a demo channel? For folks who a) haven't hacked their Wii, and b) would like a legitimate way to try games before buying them without having to rent. Obviously, a demo channel would be virtually useless to pirates, but for honest people out there who actually want to support developers it would be great. Not to mention the fact that the VAST majority (I'd guess at least 95%) of Wii owners will never alter their systems (or even know how, or that they can for that matter).
The (lack of) Wifi speed combined with the still quite limited storage will probably prevent a Wii demo channel from ever existing, however.