Final Fantasy VII - It certainly propelled the PSX to a strong lead over the Saturn and N64. But Sega's new hardware didn't come until late 1998 in Japan and late 1999 in America, and, while not a sales slouch, it didn't "shift the balance in a dramatic fashion."

NetLink - I don't know about the "generally happy" part, but NetLink sales were weak throughout its lifespan.

Tomb Raider - The movie didn't arrive until 2001, and Jennifer Connelly was far too busy becoming whisper thin to star in it. Besides, Connelly isn't really an action movie actress.

N64 delays - Delaying things is what the N64 was made for.

Playable demos - For some reason, this never quite took off. Square kept it up for a while with things like a full second preview disc packed with Parasite Eve (containing a demo of Xenogears along with video of Brave Fencer Musashi and FF8), but mostly demos remained confined to discs packed in with magazines. There are a few notable exceptions, such as the infamous MGS2 demo with Zone of the Enders. Downloadable demos have since made the entire issue moot.

Sega PC - According to MobyGames, Sega released 14 titles on Windows in 1997, including ports of Daytona USA and Sonic and Knuckles. I may be wrong, but I do believe Sega's Lose Your Marbles was a PC original.

Sega's analog controller - As far as I know, this never got bundled with the Saturn. Correct me if I'm wrong. By early '97 Sega was already starting to give up on the Saturn, so I imagine they didn't think it was worth the effort.

Hobbyist Playstation devkit - Known as Net Yaroze to most. It's hard to say that "sales are slow" -- you're making an amateur game programming kit. UGP makes it sound like this was sitting on the shelves at Toys R Us or something, when Sony was clear from the beginning that this was not a mass market product. You had to order it directly from them. In that light, I think it did what it set out to do, even if no major productions came out of it.

I'm not going to hit every one of these, but a few notes:

Sega adult titles - Nah. In fact, I'm not even sure what this Sacred Pools game is they're refering to. (There are a few mentions of the game in Usenet posts from 1996, but I can't follow where it went from there.) Sega did create a "mature" label called Deep Water back in the Sega CD days, but the only titles ever released under it were Eternal Champions, X-Perts and Duke Nukem 3D. I was always a little surprised that they didn't try to release one of the Saturn's five billion softcore dating sims in America as a last ditch effort to bring some attention to the system.

Quake and Id fade away - UGP (and many other magazines ) slightly over-estimated how completely third-person adventure games were going to take over the world. Quake II was released in the fourth quarter of 1997 to great acclaim.

Third party declines N64 - Eidos never did release an N64 game. Capcom eventually released a few, such as Resident Evil and Mega Man Legends.

Little Penny - Thank God, this fad blew over before a game could be made.

Net Link sex scandal - Even with Xbox Live in its second iteration, we're still waiting for this to happen. Especially with that Live Vision Camera, it's just a matter of time, isn't it?

Street Fighter III - Street Fighter EX Plus seems to be the only real SF game to hit before SF3. EX 2 and Alpha 3 didn't come until 1998. Marvel Super Heroes vs. Street Fighter also came out in 1997, but deciding whether that counts is a nerd argument I don't feel like starting.

Saturn price drop - In mid-1997, the Saturn dropped to $149.99. Many games were set to $39.99 or lower, but nothing was capped at $30.

Gameplay returns - '97 was a little early to start saying the 32-bit era was reaching its limits in graphics. Hell, FF8 didn't come out until 1999. That said, 1997 did see the release of more unusual, gameplay-focused games like Parappa the Rapper.

Minimum requirements - I've tried to think of games that might have pushed the limits, but I can't find anything had requirements this high. Quake II's minimum is a P90 with 16MB of RAM; MDK's recommended is a P133 with 32MB.

Square works with Nintendo - Didn't happen. Wikipedia has a couple games listed under List of Square Enix games, but those are Enix and Quest titles, not Square. Also, near as I can tell, none of Square's Aques titles (Power Stakes, Digical League) ever came to America.

M2 launches with mild success - The M2 didn't launch at all.

Model 4 - The successor to Sega's Model 3 was NAOMI, which was first shown at JAMMA in 1998.

N64 online - The 64DD, once finally released in 1999, had some networking capabilities via RandNet. Here's how IGN described it:

While the Randnet service delivered a passable surfing experience thanks to the bundled Nintendo Mouse, the actual content was much too limited. Anyone who has used the Internet would snicker at the lack of up-to-date contents or tools offered on Randnet. To make things worse, only some of these services were actually made available online. Beta software testing? In your dreams. Music distribution? Yeah, right! Nintendo quickly realized that Randnet wasn't going to fly and pulled the plug early. As of February 28, 2001, Randnet is but a memory.

Strangely enough, a special live Zelda game was being played over the Super Famicom's satellite modem add-on called the Satellaview in 1997.

3D accelerators - A good summary of 1997 in the world of graphics cards can be found here. Needless to say, the major competitors were 3dfx, ATi and Nvidia, not Rendition.

Psygnosis on the N64 - Psygnosis only made one N64 game, Wipeout 64 in late 1998. It was, however, similar in many respects to XL.

Nintendo's 32-bit handheld - This project, known as Atlantis, had been known about since at least 1996, and everyone kept waiting for it to finally show up. It wouldn't be until 2001 that it would appear in the form of some little trinket called the Game Boy Advance.

Systems don't exist - No PS2, no Dreamcast, no M2. Thank God Sega didn't release a 64-bit machine, or the eventual collapse of their hardware division would've been even messier.

Acclaim - If only Acclaim's death had been this quick. No, they had to thrash about a bit, providing us with such sterling landmarks in video game history as "Name your baby Turok for ten grand" and "advertise Shadowman on your tombstone for CA$$$H". They filed for Chapter 7 bankruptcy in 2004, but the brand name has subsequently been brought back in the form of Acclaim Games. Throwback Entertainment acquired over 150 of their titles last year.

I think the SA Forums archive is open to the public -- if so, you should really read Frank Cifaldi's take on visiting the Acclaim estate sale. It's really depressing.

Meanwhile, back in 1997, Acclaim was giving us such hits as Forsaken and Extreme G and laboring tirelessly toward their own demise.

Namco movie - No CG movie, but 1997 was the year of release for Tekken: The Motion Picture.

Cable modems - It took broadband a few more years than this to really take hold. As this CNN chart shows, broadband access was in 6 million American homes in 2000.