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KungKras said:

Interetingly enough, to fix the 32X the solution would have been to not make the saturn. (until, like 1996 or later)
Both were good ideas that were completely unable to coexist in the same timeline.

I feel like it'd be better to just drop the 32X; waiting until 1996 to release the Saturn would kill the system even worse than historically as the PS1 would have way too much of a head start and would have entrenched itself so thoroughly that Saturn would be DOA.

Your scenario above, skipping the 32X, is probably the Saturn's best shot.