Regarding the size of NES and Sega cartridges - I'm not sure their chip sizes were significantly different. The cartridge shells were the main difference. NES carts were mostly empty space in order to accomodate the unusual front-loading cartridge port. The original Famicom carts are a lot more similar in size to SMS/Gen/MD carts.
Virtua Racing was incredible on the Gen/MD. However, it also cost $99 (in the US) when it came out, so I only experienced it as a rental. This would be a surprisingly expensive game in 2013, so you can imaging how shocking it was in the early 90s, when there was an abundance of games to be had for $29 - $39.
Although it might be argued that the SVP chip was underutilized, only being used for Virtua Racing, it's hard to imagine that there would have been a sustainable market for a series of similarly enhanced games at a hundred bucks a pop. The 32X made that sort of enhanced chipset a one-time expense, and the games could be priced more reasonably as a result. The downside was that such a device always fragments the userbase.
Still, the Neo Geo proved that there was a niche market for extremely expensive carts that could provide a perfect arcade experience... at least for a while.
But by the time the SNES was getting ready to launch, everybody was looking towards CD-ROM as the next medium due to its vastly increased storage capacity and much less expensive manufacturing process. In fact, prior to the MD/Gen launch, my friends and I were hoping it would use CD-ROMs standard. Sony and Nintendo had preliminary plans to develop the Playstation together at least as early as 1991 (when rumors of its existence first started being reported in US magazines), and it was planned to be a CD-ROM based console from the start.
It took a while for CD-ROM drives to become fast and cheap enough to break into the mainstream. Ultimately they took over, and that ended the possibility of having enhancements built into the game medium as could be done with cartridges.
Incidentally, with the first handheld cartridge system, the Microvision, each cartridge contained its own processor.
