I don't think the MD/Gen did poorly, just it didn't quite have timeless games like the SNES, so it's just not quite talked about as much. Most of the games at the time tried to look cool and pushed things graphically, but gameplay wise, they still felt a lot like the 8-bit games. While the noteable SNES games pushed things in other ways as well, not just graphically. That said, the MD/Gen still had a few classics, and I'd argue it's still better than the SNES for multiplayer games.
Instead of going for expansions, Sega probably should have gone for expansion hardware built into the cartridges like the SNES had, or focused on developing the next generation console. The expansions (32X and CD) were expensive to develop, expensive for the consumer, and inherently splits their consumer base. Maybe they could have done with Nintendo (normally) does with handhelds. They could have had it so all games would work with the basic Genesis/MD, but certain games would have enhanced graphics, performance, and sound with a 32X, instead of having 32X exclusives.