I don't think TG-16 would have won any war, but I do think they could have been much more successful if they positioned TG-16 as a console for "niche" games:
1. NEC never exploited the shooter genre. They should have taken a page from Hudson's Caravan and Naxat's Carnival and promoted shooters via contests (in the pages of mainstream gaming magazines) and possibly held events in major cities / malls / college campuses. The key thing would be to promote the sense of community around the shooter genre and make everyone feel as if they were a part of it (so, even if folks couldn't get a high-score, they were involved in the shenanigans nonetheless). I think magazine-only campaigns would have been sufficient.
2. RPG's: Bring over more Japanese titles and port existing domestic computer titles. Tons of great PC games, like the early TSR D & D games, *might* have made a decent translation to the TG-16. Think "Eye of the Beholder", but bigger, better and more ambitious. I like EotB a lot, but it represents a starting point. As many of you know, many classic PC RPG's appeared on the PC Engine (i.e. Wizardy), but I think that sexier titles would have been necessary to capture folks attention... (like Wasteland, which was an EA property and thus had no chance of appearing on TG16). Well, even Wasteland was dated at this point, but you get the idea...
3. Racing RPG's: Create more of them, especially for the CD/SCD format. Create a national campaign around Final Lap Twin. In time, NEC could have a monopoly on the sub-genre.
4. "Party" games: Develop the world's first 3+ player shooters (where folks can choose to play as the enemy... I imagine a "boss rush" scenario). This would simply be a bonus mode of play in addition to the normal 1-2 player mode.
5. Exploit Zonk mascot further: Zonk should have starred in a bunch of fun platformers, perhaps even sharing the stage with Bonk occasionally (through the magic of time machines). Zonk becomes a household name and soon even breakfast cereals bear his likeness...