One of the reasons the TG-16 is bigger than the PCE is because FCC regulations require some shielding. Now, it could very well be that the shielding (and any other requirement) could have been retrofitted into the existing PCE design... that's when Keranu's point comes into play (if you pay $200 for a console, you wanna get your money's worth in plastic!).
BUT, here is an interesting tid-bit: The japanese DUO was designed with the U.S. market in mind, because they allowed room in the console's design to add shielding. It doesn't mean that the DUO was destined for the U.S. market... but it reveals some foresight by the engineers/designers to keep the option open, just in case the DUO did make it overseas.
So, there are two issues here:
1. To what extent was the TG-16 designed strictly for aesthetics
2. To what extent was the TG-16 designed to meet technical / economic constraints
I think both factors played a role. Personally, and you'll laugh, I think that the U.S. TG-16 is kool. Let's consider contemporaries:
* the NES is a box, a box I LOVE, but a box nonetheless. The later A/V redesign is even uglier than the original NES design, IMO. Now, I happen to love the look of this box... but you could never describe the style as "inspired"... "utilitarian" definitely, but not artistic.
* SMS -- I love the original design. Yes, it's angular, but it is NOT boxy and therefore has an awesome 80's high-tech feel to it. SMS, you rule. The later redesigns: ugly.
* Sega Genesis -- sorry, but I never found this console attractive. The original design is much more interesting than the later redesigns, IMO, but it's still pretty ugly.
* TG-16 -- SEXY AND SLIM, like a more sophisticated version of the original SMS. Eschews the top-loading cart (which is ugly, folks) in favor of front-loading. The original NES rocks because it is front-loading... but for practical reasons they should have ommitted the "pressing down" aspect.
* TG-16 + TG-CD -- oh crap, this is not sexy and it is not slim. BUT IT IS A FRIGGIN' ODD SHAPE and therefore a compelling design (all those nooks and crannies!).
In summary: top loaders are ugly, while genesis ruled, it was an ugly console, SMS & TG-16 had the koolest 80's hi-tek aesthetics out there.