Additional stupidity; I remembered that by the time the 32X was announced in the UK, the (entirely incompatible) Saturn was already due for launch in the near future. Worse, I recently found out that in Japan, they actually launched at almost the same time.
What was the point of that?! Who was going to buy the 32X knowing that it was a stop gap for something imminent/already here? Granted, the 32X was much cheaper at launch- which was apparently the justification- but anyone with half a brain would have known that it would die when (as all new consoles do) the Saturn came down in price enough that Joe Public would buy it instead of a half-baked piggy in the middle.
(And anyone who realised that should also have realised that the software companies would be thinking the same thing and not likely to waste their time supporting a dead-end console.)
The other problem with the 32X was that Sega had *already* released an "enhanced capabilities" add-on for the Mega Drive/Genesis, i.e. the Mega CD, which you already mentioned. So the 32X was, in effect, the third separate (incompatible) "format" built around the same console.
All that is stuff that should have been obviously stupid at the time; there were other factors that led to Sega's downfall (e.g. Sony playing the PlayStation launch very well) one could argue are easier to spot with hindsight, but those were on top of the obvious stupidity of having the half-baked 32X muddy the waters- and confuse the consumers and retailers- at the time of the Saturn launch.