I dont think sega gave up too quick, They were first with lots of things and that came at a cost. Its a shame sega had to take the hit though.
I used to have a megadrive 2 and the mega cd 2 addon ... and later also the 32x addon, but I sold it all to get a new amiga
Things didn't workout that good after the megadrive 2.
I really miss the mega cd some times but there are emulators around. Those cd's are pretty hard to come by
Sega still creates cross platform games, but ive not seen anything that was that great. A friend of mine showed me a 3d sonic on game cube this summer, but that game sucked pretty bad. We did have some fun with Phantasy star online in multiplayer but it got booring rather quick, Pso eposide 3 was rather odd too.
I never had the chance to try the Dreamcast, but im sure it was great.