I recall as well all the rumours with regards to additional HW, I'd imagine most of it was wishful journalism, an article I read in period could have been Super Play or CVG magazine mentioned that Namco's Starblade was under conversion for this system, supposedly touted as arcade perfect. Maybe other bios cartridges were at an experimental stage with additional co-processors such as the Super FX chip or Super FX2? I guess we will never really know.
It is pretty amazing to see it running at all considering its age and rarity.
A Nintendo document was leaked showing some specs for the RISC processor and block diagrams.
There was actually an SNES CD document that was leaked a while ago. It was from 1993, so quite a bit later than when this prototype was made (1991). Like this prototype, it shows all of the expansion hardware is on the other side of the cartridge bus. But unlike this, it has considerably more added hardware, like 1.5MB of DRAM, another 128KB of PSRAM, 32-bit RISC processor, an audio DAC + AMP, and an ASIC that combines a 65c02 and audio decoders (XA, ADPCM) for CD-ROM management.
It doesn't say what the RISC processor is, but it has about the same clock speed, instruction cache size, and floating point capabilities as the NEC V810 used in the PC-FX and (probably more relevantly) the Virtual Boy. So I have a pretty good feeling that that's the CPU that was chosen.
Interestingly, the CD-ROM is specified as 2x data-rate, unlike the 1x drives in Sega CD and PC-Engine CD. And the CDs came in cartridges which also included up to 32KB of backup SRAM.