I'd rather have Nintendo-Sega industry to be honest than what we have now which is just bland PC boxes and two main console companies that basically just do the same thing.
Tech was evolving just fine as NES to SNES to N64 to GameCube were all terrific hardware leaps.
It costs billions to design a monolithic CPU/GPU these days, cost which became untenable after the 6th gen... Nintendo, Sony etc' will likely never go back to custom designed chips for their consoles ever again.
Fact is, consoles need PC technology as it's cheaper, already designed and allows a faster time-to-market...
Not to mention AMD, Intel and nVidia spend billions in R&D every year and leverage the latest manufacturing from TSMC, Samsung, Global Foundries etc' to have the best possible performance, it's difficult for other companies to keep pace with their cadence.
And that is before we touch on the issue of game development costs, leveraging commodity components means it is easier for developers to come to terms with the hardware, reducing development time and costs for games.
The N64 was a powerful powerful console. More powerful that PCs when it launched (if I'm not mistaken).
You are mistaken.
The Nintendo 64 dropped in 1996. (1997 in many other parts of the world)
The PC had 3dfx Voodoo. - And it was propelled by the likes of Resident Evil, Quake 2, Descent II, Tomb Raider and more.
And unlike the Nintendo 64... The PC games weren't a low-res blurry mess of 320x240 like the Nintendo 64... 800x600 was more than possible, which is a higher resolution than some Nintendo Switch games!
And on the CPU side of the equation... You had the Pentium 200MMX which was pretty beastly and it wasn't unusual for PC's to have 32MB or more of Ram... Which is multiples better than the Nintendo 64.
And unlike the PS1, it was all perspective correct... And unlike the Nintendo 64, developers didn't need to rely on garaud shading to make up for a tiny framebuffer.
Games like Turok: The Dinosaur Hunter looked and played better on PC at the time, especially under Glide.
In-fact many N64-PS1 to PC multplats were better on PC like Final Fantasy 7 and 8, Doom, Carmageddon, Duke Nukem, Rainbow Six, Indiana Jones and more.
In short, the PC has always been ahead of the consoles, except in the Audio department where the SNES was pretty damn brutal, but it lost to Soundblaster once that came about.
I really don't see anything about gaming on the PS1 that a CD-equipped N64 couldn't have delivered. Also bear in mind PS1 would've still been there, it just wouldn't have had a near-monopoly.
Graphically there would have been a reduction for the N64 side of the equation, especially in the texturing department as it's less effective to stream textures from a slow CD-Rom verses the N64 cart which was pushing a few hundred megabytes a second... Would still be better than the PS1 of course.
But yeah, there is absolutely nothing the PS1 could have done that a CD-equipped Nintendo 64 couldn't.