What you are describing is not the Genesis approach. Sega actually heavily catered to less successful third parties (EA) that couldn't make it on Nintendo competing with the big guns (Konami, Capcom, etc.). That helped them get exclusive or "best" versions of EA Sports titles and others.
However, the strategy you are suggesting to go it alone could actually work, as could the true "Genesis strategy" I described above. Nintendo should open two western studios. One to make sports games in some of the key categories such as US and Euro Football. Realistic, licensed sports games. The other to make mature titles in categories like shooters or adventure games. They should also cater to a few up-and-coming 3rd parties like they are doing with Platinum. They may not have Metal Gear or GTA on their system, but by funding innovative new developers they may catch the "next" MG or GTA. Acquiring Monolith already goes well with this strategy. They can make games beyond what was once third party territory dominated by Square. Something similar for sports and shooters would really compliment the great platformers, adventure titles, etc that Nintendo make in-house.
