That would have been a very interesting timeline. Mind you, every console manufacturer under the sun made useless add-ons/consoles, but when a company damages their brand identity and the good faith of the consumer as much as Sega had at that point, it's difficult to recover.
For example, the Virtual Boy was a massive, laughable failure, but Nintendo had a big cushion of consumer trust to fall back on (and they didn't put all their chips on that abomination), so they could recover from this debacle. In Sega's case, people were already pretty wary, because the Sega CD had a terrible public image (in part with good reason), since it was an expensive device and most games barely tapped onto the power it truly brought to the table.
Then came the 32X and... would you look at that?! it's an expensive device and most games barely tapped on the power it brought to the table! that meant that the Saturn already started on the back foot.
Edit: by extension, this created an ominous air for the Dreamcast as well, even though the DC was absolutely a step on the right direction.