Those two consoles were indeed the dark ages of Nintendo.

The N64 didn't have nearly enough games. The few games it did have were usually double to triple the price of PSX games, and often half the quality (aside from the few gems, N64 games were often really low quality).

Just because the cause of the N64's problems is explainable (cartridges), does not mean the problem didn't exist. It did exist, when the PSX hit 200 games, the N64 had 3 (Mario 64, Starwars, and Pilotwings 64). Most months of the N64's existence, no games were released at all; and, aside from Novembers and Decembers, there were no more than 3 games released in a month. The N64 was a really bleak time period for Nintendo.

I think the GameCube was worse, simply because it was the only Nintendo system that really had nothing special going for it. It was PS2 Junior.

But is this a meaningful market expansion, or merely geographic, taking advantage of the fact that Sony had better distribution networks being an all-purpose electronics giant than Nintendo or Sega might have had?

This isn't to say that Sony doesn't deserve credit for bringing Europe better into play, but it does suggest that PlayStation's appeal to the consumer in history is now viewed as more significant than it actually was, vis-a-vis the gaming market as a non-geographic entity.

Dreamcast was the only 128 bit system that gen, believe it or not.
GameCube and PS2 had 64 bit chips.
Xbox had a 32 bit chip.

The N64 was 64 bit capable; but it was never utilized, the data operations were 32 bit for all games. The console was bottlenecked in several areas, and was an absolute nightmare to develop for.

For the most part, Nintendo was the one who often defined industry trends. The success of Super Mario 64 led to countless platformers spread accross all game systems. Ocarina re-defined modern adventure games. The usage of rumble feedback, analog control, and an emphasis on camera control in 3D pace led to the dualshock and our modern day dual analog controller. The secret with Sony was they never had to define anything. They just needed to lure 3rd parties on to their consoles. 

Nintendo's mistakes with the N64 was partly because of their own philosophy towards games. They are a gameplay-first company. While using cartridges was controversial to everybody else, it made sense to Nintendo. They don't need disc space to create good 20-40 hour games and cartridges could combat piracy better than CD's. Sony's philosophy however is electronic entertainment. The gameplay mattered less to them and their main focus was to entertain the consumers and games with high production values could do this and those high production values could sell games.

GameCube should have been the system that let Nintendo maintain their philosophy while being able to handle the high production values, but their inability to market the system to a wide age group and the lagacy left behind by the N64 doomed the poor system. 

2) Somebody's going to have to explain this properly to me. I understood disruption to be the ability and event of taking over marketshare from competition (thus far). I understood this when I was explained the meaning of upstream/upward and downstream/downward disruption. If selling more does not mean reaching a larger market, than I'm at a loss.

3) It does. Anyone who refuses to think so is in denial the market is quite clear about it. It only ignores overlap if it is performed by a noob. For the 2nd paragraph, that's part of your paradigm and there is no evidence to support it, no matter what you've brought up this far. As it stands, I sense my theory more robust than yours. I've been wrong before, so I'll leave it up to my gut for now. We've mulled over the numbers, we'll just have to respect each other with opposing views, while remaining open to further analysis of numbers. Mario 64 is in my eyes a legitimate sequel, despite what happened and how you interpret that. Case closed until further data arrives.

4) You understood me wrongly. I know that SMB sold well because of its own intrinsic appeal. As a bundled piece, it gave the console very high market value. Of course in Japan it sold nonetheless very well. However, the circumstances of both SMB and Wii Sports were pole opposite to what SM64 saw. As I said, it got castrated by PS. I was just saying, imagine if it were bundled, how many more N64s would have sold by the merits of SM64 (certainly more you cannot deny, a free game sells more than a paid game), and would have also proven its worthyness. Too bad things happened otherwise, not only did Nintendo suffer, but we actually need to argue something so desperately obvious, especially how great a game it truly was for its time.

True, but the PS still doubled the sales of the N64 in NA, and even more significantly, quadrupled its sales in Japan.

It also proved how weak Nintendo was on its own, and how strong the 3rd parties could be. Ultimately Nintendo only fixed that with the Wii, where they proved once again that they were able to pump out games of very high appeal and at a decent rate so as to keep interest in its platform. This was a Wii innovation, and the reason was very cost-effective game development strategy.

I think ultimately Sony was more in touch with what gamers wanted than Nintendo was. Their appeal to the mass really worked, through the variety they offered (thanks to 3rd parties) and their marketing. Nintendo was a blip in an ocean of silence in comparison.

Mind you, their N64 color bundled did help boost sales in NA. In NA, Nintendo did manage to come out less scared than they should have. They did ok all things considered. It could have been even worse.

When people say 128bit they don't mean the chips they mean performance wise, PS2 had a 64bit chip with a double core, hence why the EE is called the 128bit emotion engine while the GC had a similar style set up with a faster processor, the DC chip itself was a 64bit double core.

The point of the matter is not whether Nintendo made mistakes to shrink their share, they did. The root of this discussion is whether Sony's contributions were more meaningful than mere geographic expansion.

Thank you for explaining this to me. Here is a clearer image for those interested.

Ultimately, the term I was meaning to use was Sustaining Strategy, and that by sustaining strategy, 3D Mario would end up reaching a much higher potential, despite early castration (someone help me find a better word).

I don't buy it. What happened to SMW in Japan? Why didn't it sell 6M? Was it half as much a legitimate Mario game as SMB was? Lets see how you fair in defense mode.

Case closed. You obviously don't use any common sense. If a game costs:

N64 system cost + Mario 64 game cost.

But could have been sold at

N64 system cost

Then it will sell as many if not less copies? How am I supposed to trust your judgement?