Yes, the CD32 had a lot of potential. I remember seeing the Microcosm cut-scene playing on it in a store demo, I was blown away.
Against the SNES and Mega-Drive a.k.a Genesis it stacked-up nicely, especially since it had CD and 32 bit.
And it was expandable.
The following year Sony released the Playstation. Assuming Commodore didn't become insolvent, and If the CD32 had the right kind of development support and they released a decent expansion that bumped-up the CPU and added some improved graphics (maybe an Akiko II), it could have even competed with the Playstation. For a while at least. Maybe long enough to get the next console. I know, that's a lot of ifs.
Would they have called it DVD64? Or perhaps CD32/3D?
I wonder.
Anywho, I fulfilled my dream about eight years ago and got me a CD32 in the original box, some 30-odd games, 2 CDTV titles, and a SX-1 expansion.