Fatal Frame? Fire Emblem? Battalion Wars? Mother? Advance Wars? Star Fox? Baten Kaitos? 

I did say very few.

Anyway, of the games you mentioned, how many were actually worth giving a sequel to?

It seems like they had no better alternative projects so they just hoped for the game to do significantly better than last time.... which they didnt.

Not sure why star fox is in there. From the numbers we have, it sold 3m on SNES, and 4m on N64. That significantly better than what bayonetta did.

Thode are just a few on the top of my head. As for Star Fox, the last few entries sold similarly to Bayonetta 2 and a Wii U game is in the works. If you are going to cite Ends and N64 releases, you might as well cite Bayonetta1's sales. Nintendo has funded three fatal frame games, and the Wii U game is coming to NA despite poor sales. Fire Emblem was a huge success in its last entry. Those are two recent examples.

You said a game that can't be marketed as a system seller shouldn't be made. I said that most games aren't necessarily huge system sellers. I am right. In the sea of thousands and thousands of games, not very many can be considered games that actually sell a substantial amount of systems and can be marketed as such. 

Mario Kart, Halo, Uncharted, Street Fighter, Zelda, Gears of War. These are games that sell systems. Most other games just accumulate with a library and make a console more appealing than before. These include games like Bayonetta, LittleBigPlanet, Sunset Overdrive, etc. They're not huge, record-breaking games in terms of sales but they're very good quality and they typically sell enough to make a profit. 

Just because a game isn't a multimillion seller and doesn't sell hundreds of thousands of systems, doesn't mean they shouldn't be made. I assure you, very few games would be made if this was the case.

if anything it's going to be Nintendo exclusive. If SEGA didn't do a sequel after the first game, I don't see how the sales of the second game could make them change their minds.

I doubt anybody at Ninty expected it to do 5m or something, lol. Bayonetta has a good chance of passing 1 million, and when it comes to sequel talks, I wouldn't be surprised if it was Ninty exclusive again.

The sad reality is that a third Bayonetta game most likely won't happen, which is a damn shame!

I'm not questioning the release of new IP's like sunset overdrive because predicting a system seller from a bunch of new IP's and looking at how an existing game previously performed are two different things.

I'm stating that when exclusives dont perform as well as expected, companies will go for alternative projects which are more promising. Its about opportunity costs.

I really dont think it will be that hard for nintendo to be convinced that another project (or several) can be a better system seller, or even sell more to their existing userbase than Bayonetta 3 can.

If they dont find better alternatives and still go with bayonetta 3, it would be unfair of them to expect it to perform significantly better than it has proven to do so.