Yeah, the Sega CD was really damned powerful. I don't blame the FMV stuff for it not ending up that great in the end though. If it didn't have the FMV stuff it simply would have had that many fewer games. Quality Japanese developers were in short supply because almost nobody bought the Megadrive in Japan. They certainly weren't going to buy a 40,000 yen add-on for it.
I also think the crappy colors in the base Megadrive really held it back too. When people see SFC (or even PCE) compared to the muddy crap on the MD they are turned off, and there was no way a CD add-on was going to fix this.
I mean, realistically, there is no real reason LoT should be better on the lowly PCE than it is on the MD. The PCE is a much slower machine and the CDROM2 doesn't add anywhere near as much power to the PCE as the MCD does to the MD...but you do kind of need color. 
A lot of games had poor color choices however the MD could indeed put out great color, at least three times the 64 color limit just by using the shade and highlight trick. Hell Toy story had over 200 colors on screen at some point.
The CD add on IMHO should have been a 32X CD unit at least. IDK why it didn't.
Because it would have pushed the price of a complete system to 3DO levels? Because the Hitachi SH-2 didn't even exist yet? Because it would have been monsterously difficult to program for? Because the 32X was pretty much a US project begun after the MegaCD? Because the 32X f*cking sucked?
Maybe one of those reasons. Maybe all if those and more.
Btw, this forum has been over the "such and such system was ACTUALLY CAPABLE of such and such tricks" a million times before and honestly it's dumb. If all the games on a system are brown then it's a brown system. I'm sorry it's brown. I'm not glad it's brown. But it's brown. Maybe the system can only do brown stuff for technical reasons, or maybe everyone that made games for it sucked. As it is, the MD basically makes for muddy graphics. Games that actually have decent color are usually stuff like Sonic or Phantasy Star IV where they use almost exclusively bright pallets. If you want something subtle but nice, like Lords of Thunder for example, it seems to not be able to do it for whatever reason.
So, while I'm sure Toy Story is awesome and all, overall anyone playing Genesis games is playing brown dull looking games.
I think the Sega CD, albeit powerful, should have been a full step forward. That means a true upgrade. More color for sure. I don't think the 32X itself sucked, I think everything else supporting and implementing it sucked. That said it wasn't needed. Delay the Sega CD a year, make it display a f*ck ton of colors, that is all they would need to carry them into 1997-1998. The issue is of course as we know it U.S. Marketing. How can you expect a system to carry 4 mediums? (Sega Genesis, CD, 32x, 32X CD). I followed along and loved it until I got my Saturn but most people hated the idea of it and I certainly don't blame them. I still play my 32X as we speak today.
Saying all the games are brown is ignorant, it's like me saying all the PCE games are colorful 8 bit games with no parallax, we all know this to be false and one look at a game like Dynamite Headdy would flip you in a second. The main titles on the Genesis were very colorful indeed.
Each system has it's strength and weaknesses. Sega was increadably short sited when making the Mega Drive, it wouldn't have cost that much more to add the extra color, I mean the system was already set up for it but it wasn't as they didn't see a reason back in 1988, an error indeed. What they did do was give it a proper 16Bit engine which handles a lot on screen with minimal slowdown. That is what I like along with clever programing bringing the system into games it was never designed for.
