There were several things wrong with the CD32.
1. Released too late -- it really should've been developed in parallel with the A1200/A4000. The Saturn (ultimate 2D gaming system with some 3D capability) the PSX (first real 3D console), and the NEC PC-FX would all come in late 1994 to smash it. If the CD32 had been released in 1992 it would've had way more lead time to build a following.
2. Had only CHIP RAM -- The AGA chipset *HOGS* chipram bandwidth. If they'd included 2 megs or even *1* meg of fastram as standard, it would've doubled the performance of the machine! I think a 2M + 2M configuration would've definitely made the console more impressive.
Things that would've HELPED if it could've been done affordably:
3. Could've used a 3D processor -- it wouldn't have to have been a very good one to compete in 1992, or even 1993. I think they could've done without. Remember in late '94 only the PSX had any real 3D support in hardware. The Saturn had a lame, slow coprocessor that was so slow that its two main 25Mhz SH-2 CPUs could outdo it with software rendering, and the NEC PC-FX had no real 3D capability at all other than rudimentary software rendering in its 20Mhz CPU.
3. No FMV as standard -- Something the PSX and NEC PC-FX had built-ing, and the Saturn could do semi-okay in software thanks to its much more powerful processors. Honestly I don't think this could've been done in hardware affordably in 1992 or even 1993, but a 28Mhz 020 with 2M+2M memory configuration would've been able to do okay FMV in software.