oh wait I almost don't want to remember that the console lacked a DVD drive so as to have feature parity when the XBox 1 showed up. rollseyes...
In 1998, DVD drives were still very expensive. PC DVD-ROMs were around $200, if I remember correctly. Paying over $200 for a set top DVD player was also commonplace. No doubt it would've been great for the machine to have a DVD drive though. I do wonder if an SH4 @ 200 MHz has the grunt to play a DVD movie however. On PCs you needed a Pentium II 400 to really do it well.
But year sorry if I ranted too much but as a SEGA fan the idea of Microsoft wanting to work together to "help" make the console easier to develop for and therefore "help" erase the memory of the Saturn as well as by simplifying the console design (ie one SH4 instead of two) sure brings back memories.
Dreamcast fit well with WinCE. The SH3/4 chips were showing up in loads of PDAs which ran WinCE. So for Sega to say that their console was compatible with CE was probably an attempt to make it look like more than a game machine. WinCE development also made it pretty easy to port Windows games to it. Porting is all the rage today so I don't think it was a bad call back then.
I've been wondering if the VGA cable existed to allow the DC to be a sort of PC if WinCE went anywhere on it. Think of something like a Web/Email box akin to WebTV.
I'm also not sure how adding a second CPU would've necessarilly been a good call. Consider that multiprocessing for gaming is still a touch and go today. It would add a lot of complexity, cost, and maybe add nothing of value to the system. I wouldn't say that Saturn was any sort of proof of concept for it, and I think they wanted to simplify the whole console architecture. The simplification of the architecture compared to the Saturn smorgasbord mess, combined with the option for developers to use Windows development tools, makes it plainly obvious that Sega was trying to attract developers with a new easy-to-program-for image.
If any hardware changes were to be made, I think that they would've been much better off getting more clock speed from the CPU or adding more RAM. But honestly I think that Dreamcast was excellent hardware for 1998. It's efficient. It's
dramatically -shockingly- better than the 2-3 year older N64. It's much less of a mess than Saturn / 32X. The goal of the design seems to have been to make it developer friendly instead of some sort of elitist programming competition.
I want to say that Sega should have brought Dreamcast out later. Maybe after PS2 and with superior hardware. PS2 was just such a phenomenon that crushed Dreamcast. It's really tough to tell. They needed more money, more hype, more excitement. Sony blew them out of the water. I think the same thing basically happened to Cube vs. the behemoths. Maybe Nintendo and Sega could've worked together on a single console effort to go up against these absolutely huge companies. Companies that can spend nearly endlessly to accomplish their goal of owning the living room.