I don't really see why they'd have Android and if it did, if it'd be any good.
First off, Android's big thing is that it's open source, right? Almost anything open source for a game console is just bad news to the console maker. It probably just makes piracy easier. That takes away one of the biggest appeals to Android if it's closed source.
Plus the other big draws are like the marketplaces for a diverse amount of apps. And do you really think Nintendo would take Google Marketplace or Amazon Marketplace? Probably not, they'd do their own marketplace (eShop). Which would kill the point of having a marketplace.
So basically you're stuck with something called "Android" but really isn't Android. No open source, no app diversity like other Android devices, it's just possibly a similar GUI. In which case you'd just want a new Nintendo-made OS that's tailored specifically for that system.
As rumors go, I'd put this on the "really far out there and not even feasible" side.
While I do agree that it's not very feasible, I don't think security concerns is the reason. Sony basically did the same thing with OtherOS on the PS3, so open source stuff on consoles is nothing new. Sure, that feature got removed in the end, and there's no doubt their official reasons for removing it was corporate bullshit, but the fortress still held for quite some time. If they do it right, it should be very possible from a security standpoint to run Android under some kind of hypervisor, without restricting Android itself all too much.
Personally I just dont see what Nintendo has to gain from allowing it; there's absolutely no money in OS or app sales for them, unless they do what you suggest, and restrict it so much that everything that is great about Android is removed (I wonder what Google would have to say about that btw, it might be quite damaging to the Android brand, as the openness is one of it's main selling points). And yes, then they're better off just adding some web browsing feature and such to the regular OS. There's no PR value in it either, I mean, while it might actually be useful or at least fun for some, yet another device that does what smartphones do isn't all that cool. It's not like OtherOS, which made a toy into a powerful and extremely cost effective computer, fit for professional use. I can imagine the effect that had on all those kids that thinks a more powerful console always equals a better gaming experience.
They might base something on Android to run eventual secondary features on, but in that case, whatever it is, is not gonna be even close to Android as we know it, nor will it be called Android. It's not gonna be more Android than OSX is FreeBSD.
