Did you look up the Sega Neptune? It doesn't have a Sega CD in it.
Ok... I guess you're right. I wanted to believe it would have so I guess that's why I believed, even though now that I read it carefully I see that would not be the case. That's not to say a 32bit cartridge system would have been a failure though, but it would have suffered the same issues as the N64. Seeing how the N64 wasn't a total failure and actually outperformed the Saturn by a wide margin Sega probably would have been better off with a Cart based Neptune than the CD based Saturn anyway.
If nothing else it would have been easier to develop for and would have more or less kept the existing Genesis install base happy to the point where they wouldn't have abandoned Sega and went to Sony. Sega's games generally tend to be fighting and action stuff, so doing without a CD drive probably wouldn't have hurt them the way it hurt Nintendo, because the SNES was THE RPG system and companies like Square went nuts with the extra storage space CD offered. Since the Genesis didn't really have much of an RPG market and certainly didn't have Square on board, its not like Sega had as much to lose as Nintendo did. Games like Streets of Rage, Sonic, Virtua Fighter, etc. don't really need to be on CD.
However, that's not to say it still couldn't be able to link up with the Sega CD like the Genesis, or that it couldn't have been further revised to have Sega CD built into it. Its a moot argument because Sega scrapped the Neptune idea anyway, but I'm just saying that's how I believe they should have went about it.