I love the Saturn, but to make a fun 3D Sonic game on it, especially one that feels at all like a Sonic game should feel, would have been very difficult. There's more than one way to do it, but the designers would have needed to base their entire approach very strictly on the capabilities of the system.
Unfortunately, with all the platform changes and design revisions, this just wasn't happening with Xtreme. When you look at what they were attempting, it seems like they were lost in thinking about high-level theoretical 3D game concepts. The fish-eye lens and gravity rotation ideas, which were practically the whole foundation of Xtreme's game design, were pretty gross overreaches IMO. Even with more time and resources at their disposal, I don't think they would have ever made a good game on the Saturn out of those ideas.
The leaked Saturn build that's based on a totally different engine, however, at least gives me enough imagine a fun game with. Sonic's prerendered sprite looks really good, and the simplified engine is actually running at 60fps. The control feels good, too. If they had gotten something like that going way, way earlier on and built a simple, linear platformer out of it, I think they could have had something nice.