Microcosm showed us what was possible with the CD32 (the gameplay might not have been great, but the graphics and sound were impressive), but no one ever expanded upon it.
The CD32 could have done alright 3D, non-textured poligons ran alright. Guardian was cool, and that was written in Basic, so I'm sure someone could have made something better than that. We also needed more arcade style 2D games, like Fightin' Spirit which came much too late.
The potential was there, it mainly failed due to lack of exclusive games. You don't even need 3D or low prices to make a console successful if it has solid 2D games, look at the NeoGeo, they're STILL making games for that thing.