It wasn't "Too Close" to the Sega Saturn because the Saturn was released in 1994 and the Dreamcast was released in 1999; Sega released at the standard 5 year mark.

The Dreamcast failed because the Sega Saturn was such a massive disaster that Sega's reputation was destroyed in the general gaming public. With the Saturn, Sega released an amazingly expensive console that was difficult to develop for because they had a belief that their fans would pay for anything regardless of whether it had games for it or not; they even had a surprise launch to ensure that they had no games.

The Saturn sold at a similar rate to the Playstation (which is a similar rate to how the PS3 is selling) and as soon as the Playstation started to take the lead third parties abandoned the Saturn in favour of the Playstation because of the abuse they faced from Sega; by the time the N64 launched in 1996 the Saturn was essentially dead and all upcomming projects had been transfered to the Playstation.

For 2 1/2 years the Saturn sat on the market with a constant game drought that made the N64's worst droughts seem like a mild thirst. Gamers who spent $500 on the Saturn swore never to buy another Sega product again and most stuck with that promise ...

The copy protection was defeated and Sega was worried about piracy to stick it out and they were loosing money per system sold and with the piracy concerns they couldn't afford to loose money on the system without a decent attach rate.

I think the piracy concerns were over rated, but... Nintendo is going hard against mod chips, so companies are paranoid about it...

Actually it's my understanding that in Japan the Saturn was hanging on fairly well; when the Dreamcast was coming out Sega reportedly dropped the Saturn like a rock and thereby enraged Sega fans worldwide, with the Japanese ones having the most legitimate gripe.

Sega obviously learned from its mistake, supporting the Dreamcast well after it were forced to withdraw from the general market; but ironically the Sega fans had just lost all trust after the Sega CD, 32X, and Saturn all got the axe.

@HappySquirrel: try $400, in the USA at least.

@ the OP:  All of the above, plus ungodly PS2 hype, plus the false impression that the Dreamcast was not as powerful as the PS2 (see "PS2 hype").  The death of the Dreamcast is a tragedy unparalleled in the gaming industry and it is my shame that I did not buy one when I had the chance.  (Until 2005.) 

I have heard some rumor that they would manafucture some DC units again because so many ask for it :s.

Someone who knows more about it?

According to Wikipedia, Sega started selling refurbished Dreamcasts in 2006, but they have since stopped (ran out of units, no doubt).  That is probably what you are thinking of, or what started the rumor. 

Although anything is possible . . . 

 then you might as well fight the US government to not shut down all analog signals.. oh wait.. that wont happens. gg

Weren't they initially supposed to stop broadcasting in Analogue in 2004 or 2005? Hasn't it been pushed back to 2009 with people still attempting to get the government to delay until 2011? Even with the switch over to digital that doesn't automatically mean that broadcasters or consumers will automatically switch over to HD ...

Anyways, there is no need for a Wii HD because people continued to buy the Playstation which output at 1/2 the resolution of the N64 and far less than the resolution than their TV for years after higher resolution alternatives came out ...

wow... way to many similarities between the 360 and PS3!!

Scary!

 @GEBX  there is one big difference,  Sony and MS are not ONLY gameproducers.

Sega could only live if they have good sales. 

The first video resembles the wii, some how....it outsells ps1 first start sales...then dies out...