*rubs temples* Jeez, this is getting complicated!

I believe that these responses are in the same order as your comments.
Alright, I was using "extenuating circumstances" as "unusual or extreme facts leading up to or attending the commission of the offense." Sega was essentially Sega of Japan -- they had a branch devoted to extending Sega's presence to the overseas American market. Sega of America was almost an entirely different company -- partially made up of Mattel employees -- which shared its library of games with the main production end at Sega of Japan. When the Genesis took off in America and not Japan, Sega of America went way beyond their intended purpose and began making drastic executive decisions despite Sega of Japan's (that is to say, for all intents and purposes, the
actual Sega's) protests. That's where you get Sega 32X, the early Saturn launch, and the dismal localization policies up until Sega of Japan gained enough clout with the success of the Saturn in Japan to retake some measure of command over Sega of America. Such a situation would qualify as "unusual or extreme" in my view.
They may not have forgotten about it, but no one refused to purchase the Nintendo 64 because of the Virtual Boy, until very recently practically no one refused to purchase a current Nintendo handheld in the full knowledge that a better model would be released short distance into the future, no one refused to buy the Wii because of the Gamecube's perceived disappointment. Yet the Saturn was dead from the gate in the west because of the 32x. Nintendo faltered for two straight generations, yet the universe called the Wii the second-coming upon its release -- those same people weren't able to put the past behind them when Sega released the Dreamcast. Yes, these are apples-to-oranges, but it's Nintendo-to-Sega, so falling into such analogies is difficult to avoid. I wasn't trying to say that Sega's mistakes and Nintendo's mistakes/questionable stuff are exactly the same, only that Sega's mistakes were taken in far more bitter regard than wrongs Nintendo committed.
I always found it frustrating how Nintendo would constantly make you end up with an obsolete handheld in your hands, and it's kept me from buying Nintendo handhelds for awhile now -- I just never feel like I'll be satisfied with my purchase for long enough to justify the expense. Apparently that's not as big of an issue for most people.
Okay, and I think we've established that the 32X was a terrible idea. Sega of America and their actual namesake were very different entities -- the 32X was entirely the invention of Sega of America. As I previously stated, the state of affairs allowing SoA to do such a thing was, under my working definition, an extenuating circumstance.
Of course they were, in their own ways -- Game Boy had better battery life, PlayStation 2 had DVD compatibility, and the Wii had motion controls. Anyway, I meant it was the superior console in terms of library and direction. The PlayStation 2 had yet to deliver more than a paltry selection of memorable games, and never offered anything close to Sega's online services or ambition in any regard. They put out a box and said, "Hey guys, make games for this thing so we can make money off of it."
See, this is where I think we just view things differently. Why exactly is it a bad thing that Sega produced niche games? You said that Sega tried to hard to be number one, yet they were the ones who were taking hits in order to appeal to a niche audience. Nintendo tries too hard to make their individual franchises number one, and I think less of them because of it. There are two sides to most of these coins you're flipping. Was it a
mistake for Sega to take the high road and be creative? Does that make it okay that counter-creative first-parties like Sony and Microsoft pushed them out of the market? Their mission statement was to bring new experiences to people -- that ambition is more admirable than the pursuit of easy dollars.
Um, the buyout would be continuing to get screwed even more after already getting screwed.
Yeah, I edited that statement to be more specific. Even retro-oriented gamers tend to agree that the console failed to meet their expectations.
Nintendo could be just as obnoxious in their commercials:
http://www.youtube.com/watch?v=wxRxMfyKcm4 http://www.youtube.com/watch?v=h53YZX39GXY http://www.youtube.com/watch?v=kkv_CDV44tI
Unfortunately I can't find it, but I once watched a Gamecube promo that talked at length in wispy terms about the "Nintendo Magic" that you can't find anywhere else, which is way more pretentious to me than "X-treme" marketing.
And, in response to your first and last points, what exactly was so bad about Sega's offerings. Outside of some arcade conversions which were more disappointing on account of home hardware restrictions than being inherently bad or simply had a healthy dose of intentional camp, Sega's library was as solid as Nintendo's. It's not that Sega didn't offer quality, it's that not everyone's tastes are so eclectic or welcoming of the unfamiliar. You're not
supposed to like every single Sega game, but when a Sega game reaches out and grabs you, it doesn't feel like a pop-song written for everyone to sing along to the chorus -- it's like a highly-respected cult band wrote a song just for you.