There's a slight beacon of hope, in that we generally did survive that absolute abomination that was GFWL, and very recently, companies like Capcom are actually trying to undo that mess via updating some of their older games to work without it. Capcom have said recently they will patch and remove GFWL from Lost Planet 2 and Resident Evil: Operation Raccoon city, which means I'll be able to play those again on Steam.

I just hope more companies try doing this to all their games that were stuck with the system, because reverting it will gain them some praise and goodwill back (I know I'm happy with Capcom's recent news for those two games of theirs). 

Rare would've been bought by Activision. Nintendo didn't provide Rare any more money and chose not to buy the rest of Rare's shares. Which came as a shock to many that Nintendo refused to outright buy Rare.

Activision made a compelling bid that Rare was very interested in, but Microsoft came in offering more money that Rare then accepted. So if it wasn't for MS, it would've been Activision. 

Well then hopefully this is a timeline where Nintendo came to their senses and bought Rare outright.

I would strongly prefer this. I don't play online much anymore except Mario Kart and fighting games. Online functionality to the degree we have now has been a net negative.

Yes. I wouldn't be surprised if in a situation without Xbox and online infrastructure about a generation behind that PS5 is unveiled like Xbox One.

-Online check-ins every 24 hours (or maybe they'd do it weekly)

-Used game headaches. It might've been digital-only out of the box with the disc drive purely as a separate accessory. 

-Region locking

-Some new gimmick like Kinect or Kinect 2.0 that is forced. 

And the backlash would likely be a lot, though how similar to 2013's Xbox One is like everything else speculation. Perhaps Sony is so emboldened by not having a direct competition that they stay the course through the launch of PS5 even with backlash. 

By the time Rare was sold to MS, much of the talent behind games like Banjo Kazooie, Goldeneye, Perfect Dark, DKC, etc had already left the building.
Their last Nintendo game, Starfox Adventures, was already a mediocre showing, and from that point on their mojo never returned.

Nintendo could have bought Rare and tried to whip them into shape, but by that point maybe they were right not to.

While I completely agree, Starfox Adventures was apparently supposed to be put more effort into, but after MS bought Rare, they just wrapped up the game to get it finished.  Basically the problems in the game are boring enemies and fighting them, which indicates they took shortcuts at late stage of the development. 

Yeah, I remember the wreck that was GFWL - but I wasn't thinking of that. That came after STEAM already started to pick up...well, steam.

My thinking was - what if MS launched HALO on their own STEAM like service back in 2001, instead of doing the whole XBOX thing.

I would say they still go ahead and purchase Bungie/Halo ... Microsoft was still a game publisher at the time and it would have made them good money on the GameCube + PC. Maybe you even proceed with the purchase of Rareware (again GameCube + Windows PC would offer plenty of sales). 

The change that I would have recommended to them is instead of foolishly blowing billions of dollars in the game console market, that you instead do what you can to help Nintendo counter Sony for a fraction of the cost. 

Nintendo (especially of that time) certainly had holes in their library, a 

Microsoft could have stepped in and helped out with games like Halo/Halo 2, Project Gotham Racing/Forza, Fable, continued Rareware support, etc. 

How many billions Microsoft have lost in the console race?