The Dreamcast was probably one of the most balanced and efficiently designed consoles of all time, but I would argue it could’ve been significantly more powerful if Sega had wanted it to be. Remember, the DC launched in the US at only $199 (¥29.000 in Japan), while both the PS1 and PS2 launched at $299 (¥39.800 in Japan). That $100 gap could’ve made a huge difference; Sega possibly could’ve included a DVD drive for an extra $100, or a bigger GPU with more RAM, or maybe they could’ve gone much further with the VMU concept and essentially turned the controller into a full-blown handheld device with its own battery, color screen and cartridge slot.
Sega was too conservative with their price target for the DC imo. I guess it was an understandable reaction after the high price and manufacturing costs of the Saturn had wiped out their profits and market share. Unfortunately, they overcorrected too hard in the other direction.
Then again, I‘m not sure if stronger hardware would’ve been enough to weather the hype of the upcoming PS2. What Sega needed was the 3rd party support Sony managed to attract on PS1, and which was carried over into PS2. Sega should’ve done whatever it takes to get EA sports games on DC. They should’ve also tried to make a deal with Square to port their FF games to Dreamcast. Imagine Dreamcast versions of FF7-9! FF8 and 9 could‘ve released day and date with the PS1 versions, since those games came out out after the DC launched. Same with MGS, which could’ve been a DC launch title. Capcom was one of the few 3rd parties who fully supported the DC; they even made exclusive games like RE Code Veronica and Powerstone. The DC needed more of that.