Dreamcast discussion inevitably involves three things:
- first gen DC games getting compared to the entire catalogue of PS2 games
- people in the West not realising that the DC had 12 months of games before it came out in the west
- people not realising that content creation and resource management contribute massively to games looking better of the lifetime of a platform
The DC was undoubtedly less powerful than the PS2 (and much cheaper to make) but the above factors lead to some unfair estimations of the DC's capability.
Like the 360 vs PS3; it fared a lot better in early multi platform games or sloppy ports. But later generation PS2 titles blew the dreamcast out of the water.
Leave the PS3 vs 360 stuff out of here, the DF comparisons say everything that needs to be said about that. There were no later generation Dreamcast titles.
Game support killed it but its performance shortcomings were becoming more and more apparent in time. It would have aged pretty fast. Feats that were becoming stantard on PS2 were pretty much non existent on the DC. The console was very easy to develop for AFAIR and its ceiling was being reached pretty fast.
The biggest part of the improvements that come over a system's lifetime come from the content creation pipeline and resource management - in terms of SH4 throughput the DC probably didn't have masses of room to grow but much of the really important stuff was still really, really immature when the DC was canned.
2 or 3 years after its release and its games havent evolved as much as PS2 games have evolved in the same timespan. After some time visuals looked similar across the board. Its as if devs have squeezed all they could do and couldnt come up with new ideas to use the hardware.
Three years after release the DC had been officially cancelled for about 9 months, and US and European customers didn't see the huge and rapid evolution in DC visuals that took place over the first year. Try looking at Pen Pen Tricelon or Godzilla Generations then look at Soul Calibur or Shenmue (and remember than Shenmue had assets developed in 1997/1998 at a time of mostly pre-final hardware and "last gen" tools).
Games in the first 12 months improved in quality at least as much as they did on the PS2 (probably more), but probably for a different balance of reasons. 15 months after release in the West the DC was canned and development was almost completely turned off. Even Sega scaled back big time on their remaining releases.
Visuals were as different as artists could make them: Shenmue, Jet Set Radio and Rez all looked very different. Every console pre-shaders did have a characteristic "look" though, and that includes the PS1, N64, and to a lesser extent the DC and PS2.
It was becoming apparent when even games such us Metropolis Street Racer, one of its latest and probably best looking racer was outmatched in many areas even by the PS2's launch RR5. Most of DC games suffered from low poly models and flat lighting.
Metropolis Street Racer was substantially delayed - it was originally supposed to arrive around the Euro launch and was still very rough around the edges when it actually launched a year later. It had many kinds of issues, like broken lighting, texture aliasing making railings invisible, and a broken points system. It stored massively larger environments in memory than a typical racing game and had many of them. It was far more ambitious than any racing game before Gran Tourismo on the PS2.
Test Drive le Mans looked much better than MSR (smoother frame rate, night and day lighting, aniso filtering, incredible draw distance, many more cars) but came later and was less ambitious in scale.
Fighting games on the DC grew outdated too, when PS2 started pumbing out high poly models and effects the DC couldnt even dream of. Soul Calibur 2 on the DC (or even TTT2) would have been impossible unless majorly downgraded
The last big fighting release on the DC was Dead or Alive 2, which came out before the PS2 even came out in the West. And even that showed a huge bump in visuals from Soul Calibur 1 which had come out about a year before. And Soul Calibur showed a huge bump in visuals from Virtua Fighter 3, which was an extremely rushed 3rd party port of the model 3 arcade game.
If your games date back to before everyone else's then it's inevitable that they will be dated, but that doesn't mean they represent the best that could be achieved in later years with better tools and masses more experience. No doubt SC2 would have to have been downgraded for the DC, but on the other hand the textures would have been rather better and in PAL land it'd have had 60hz PAL and VGA modes, which has to count for something.