I think the mistake that Sega made was in all the add-ons. Why didn't they just do what Nintendo did with the Nes and Snes and just add in the cartridge. I know they did with a couple of games but this would have been more effective than the add-ons. I mean what could the cd games do that the cartridge games couldn't? Not that many people care about cd quality sound or FMV and the fact that no colors were added made the 32x a necessity to give them the edge over the snes in the visual department.

As far as the Saturn I think that they were so focused on Nintendo and getting a head start on the next generation that they overlooked how big 3D was going to be. Sony built their entire machine around 3D and made it easy to program for. It also seems like Sega lost favor in the third party community as they had less support than upstart Sony. I realize that Sony is a big corporation but that doesn't mean everyone automatically jumps on the bandwagon.