What the heck, this is an interesting topic.

The 7800 is doing fairly well for its palette (25 of 256), and I think games like Midnight Mutants could have shown that off, but didn't for some reason (most of the time...did the game just use colors poorly? There's more colors onscreen when the Game Over logos show up).

Both games seem to have futzed around with the graphical system somewhat...I understand that the NES deals with the first number of scanlines differently, and looking at the 7800 MM game it's apparent that the text on the top of the screen is higher-res than the gameplay screen [link url=http://www.mobygames.com/game/atari-7800/midnight-mutants/screenshots/gameShotId,82911/](example)[/quote].

On the whole, I think the 7800 would've done much better with an expansion chip. Early NES games without any expansion chips (like Wild Gunman) are pretty laughable, after all. On the other hand, the 7800 was around at the same time as the NES, so you'd have thought some of the 6502 knowledge in the gaming market would've helped the system. I think unfamiliarity with or bottlenecks in the graphics CPU might've been a major factor (plus, who's going to develop for the 7800 anyway?).