the shuttle had no reason to exist
nec said it was to "appeal to children", children won't want to play CD games so let's gimp it
really, possibly the only hardware 'revision' that went larger
nec lost the plot at this point in their console stratagy and the rest is history
I agree that gimping the Shuttle seems counter-productive. That said, the Shuttle did not harm NEC, so who cares? Perhaps it even helped capture folks away from competitors.
I think the Shuttle (the budget PCE) was released to capture consumers who would otherwise have purchased a Famicom/MegaDrive. This strategy (of "budget" models) has been used consistently by all the console-makers over the past decades—strip features/reduce costs and release "budget"/"novelty" versions of the original hardware.
SHUTTLE: introduced at 18,800 yen (~December 1989, if my memory serves me, +/- 1-2 months)
CORE GRAFX: selling for 24,800 yen (~December 1989)
The CD-ROM upgrade strategy still worked out for NEC. I have yet to see any evidence that millions of Shuttles (no upgrade path) were sold, which could have drastically hindered the potential the growth of the CD-ROM user-base. Of course,you have to ask yourself: are the folks buying a BUDGET model likely to UPGRADE and purchase an expensive IFU+CD-ROM? Or are most of the Shuttle-owners a self-selected group of "budget" gamers? For example, I am a budget gamer when it comes to my kids—I buy software once it has been reduced.
The SHUTTLE, then, wasn't actually made for kids, but for budget-minded parents.
PARENT: "My son wants to play Blodia and Makyou Densetsu, what's the cheapest way to make that happen?"
CLERK: "NEC has a model of the PCE especially for you—the Shuttle!"
PARENT: "Thank Buddha! It looks like I'll save 6,000 yen, awesome."