The closest we got were all the hardware revisions for the pcengine and sg 1000. The newer versions of all of those flopped. Like someone said it ends up splitting the player base. It really only works when you kill off the old console so players are forced to move up. See the GameCube -> Wii -> Wii U (which failed mostly because people thought it was an addon like the 32x.)

That said the n64 was the most powerful console of that generation. It was developed for Nintendo by sgi, who did a lot of work on early computer graphics for movies. A 32x equivalent could have pushed it to Dreamcast territory.