Too ambitious? Lol, no. They did what they did, and canceled games was a consequence of that, not the cause.
And what was this what they did? Well... It's either complete incompetence, or it was far fetched intern competition between Sega Japan and America that lead to sub-optimal decision making (in other words : also incompetence).
I'm fairly sure my source for this is 'console wars', but I'm not 100% sure anymore. But it sketches a situation where Sega (still Japan) had a power house team and brilliant engineers... But an almost laughable understanding of video games. Sonic was a concept America took and ran with, whereas Japan could only... Follow, really. Too bad they took the decisions that... Yeah, you mentioned some of it. Hardware upgrades for hardware upgrades. A launch date they botched themselves (Sega saturnday!!! ... Except it was available before that Saturday). And not enough attempt to seduce third party developers.
Granted : they most likely would still be around (with consoles) if Sony and Microsoft hadn't entered the fray, but that sort of stunts you really can't afford when there's fierce competition.