In my opinion, the 32X simply came out too late to have the impact it was meant to. If it had been even one year earlier, the improvements it offered over the current 16 bit generation would have been so much more impressive. And while I don't agree that the 32X is as terrible as many people have made it out to be, it's quite evident that it was not a good console. There aren't any "must play" titles that offer gamers an experience they can't get anywhere else. Even the Sega CD had some excellent 2D shooters, Snatcher, and Lunar that alone were enough to make the console worth owning. Had the 32X been around longer, maybe it would have had some similarly great titles.
Ultimately, to answer the titular question of this thread, I think a bad console is one which the developers themselves do not support or have confidence in. Sega is infamous for this unfortunately: changing, delaying, or cancelling projects seemingly at a whim. If 3rd party support were the only reason, then we wouldn't have seen the N64 be as successful as it was after Nintendo lost so many developers to Sony. After the Genesis, Sega was simply too desperate and, at the same time, not confident enough to stick with their decisions.