Everybody always talks as if the DC could have gone much further over time. Obviously, things would have improved. However, with all of the current machines, we saw plenty of games really show off the hardware early on before others were able to follow. PS2 had stuff like ICO, Silent Hill 2, MGS2, GT3, ZOE, The Bouncer, and a number of others. They demonstrated that PS2 was able to handle higher poly models than anything before along with a number of new techniques used for lighting and effects. XBOX had stuff like Halo, DOA3, Wreckless, and several others very early on. They showed that XBOX was able to handle high poly models with lots of shaders and great image quality. GC had stuff like RS2 and, within a year, Prime and Starfox Adventures. They all featured high framerates, tons of geometric detail, and nifty effects. PS2's biggest flaw early on was image quality, but that has been overcome and most games have very good image quality (though still rouger than the other three consoles in most cases).
Point is, DC lived well beyond those time periods (ie - beyond 1.5 years). I think stuff like Sonic Adventure 2 shows where DC was going (great usage of stencial shadows on characters, for example, along with a great framerate and high-res textures...and very low poly models and limited effects). I don't think developers were suddenly going to start cranking out games with much higher geometry counts or any of the effects that were common in the other three. The OCCASIONAL game might come along and do something similar. The sunlight in Sega Extreme Sports was nice (though ULTRA common on PS2 and the like), but the rest of the game was REALLLLLY low poly and the framerate was the pits. Same deal with PS2 and bumpmapping. We've seen a couple examples of perpixel style effects on the PS2, but those are really rare and hardly something most would consider the hardware capable of doing.
I think the DC would have improved over time, and I would have enjoyed seeing that happen, but I don't think it would have gone nearly as far as people seem to believe. Overcoming image quality problems is very different than overcoming fillrate limitations.
It's funny that Lazy had the balls to bring up Shenmue, as it has some of the worst IQ on DC (which I admit, typically demonstrates fantastic image quality) and is closer to a rough PS2 game in that regard. The busy texture work with very little shading and lack of mipmapping leads to some extreme shimmering that would make the PS2 jealous...