Even if no PSone game ever came as close to SM64 in use of the analog stick, the mere presence of the Dual Shock controller effectively negated what was one of the few N64 selling points left. The N64 did worse because the PSX had analog sticks...and TWO of them!
It's the same thing as DVD playback. Technically, Nintendo "stole it" from Sony and MS to remove a unique selling point from them.
And if you're faulting Nintendo for not putting out a key product while they had such innovation exclusively, that's even more reason for Nintendo to hold back. They realized that the exclusivity of their innovations will run out very quickly, and they might as well NOT give the competition a head start.
~Sallow