I agree, there are a lot of other games in Japan that I think would have done better outside of Japan than JJ and Jeff. It is just such a weird game. Plus they removed the fart option (not sure what it was for) but pretty much left Splatterhouse intact (other than I think upside down crosses). Their localization side of things was wonky at best.
I was impressed that they took a chance with Y's Books I and II on CD-ROM, honestly. Just a game out of left field back then as role playing games were not exactly burning up the sales charts like they did on Playstation years later.
Which 10 games would you have launched the Turbo Grafx-16 with versus what we got? Personally I would have dropped China Warrior forever, not much "game" there other than a nice tech demo (they should have put it on a CD-ROM demo disc or something if dead set on releasing it here).
The thing about Street Fighter II was weird. They could have localized it quick and got it out. I figure it was released so late that TTI was pretty much already accepting their fate in the USA at that point. Also, remember, Nintendo held enough power over Capcom to coerce them into holding back the first Sega Genesis Street Fighter II game till the NEXT Super Nintendo version was ready to go (Special Championship Edition and Turbo, respectively I believe). Capcom was a diehard Nintendo supporter and they weren't going to hurt their cash cow in any way, even in the 16-Bit days when they had more room to stretch.
I don't think the launch titles were bad (better than the Genesis launch titles overall) though it would have been nice if they could have gotten a big name arcade franchise or something developed for release. Something very recognizable as a system seller.
I think if they had gotten Street Fighter II and Castlevania out that it could have made enough of a difference to extend the life of the system. But like you said, by that point I think TTI had already made its decision.
I disagree about the popularity of role-playing games at that time. The NES had tons of popular RPGs including Final Fantasy, the Dragon Warrior games, some ports from the computer world such as Dungeons and Dragons, Bard's Tale, Wizardry, Might and Magic and Ultima. Then there was Faxandu, Crystalis, 8 Eyes, Magic of Scheherazad, Ys and lots of others. I think they should have localized and brought over Far East of Eden. That game had the same kind of popularity as Final Fantasy and Dragon Warrior in Japan.
I think there are a number of games on the PC-Engine game list that would have made for solid releases in the U.S. though they likely would not have been huge blockbusters I would think they would do better than games like J.J. & Jeff. The Fire Pro Wrestling series, a couple of other RPGs, a number of shooters, etc.
Just at a glance through the PC Engine release list (and i only made it about 20% through before I got tired of looking), here are some games I think they could have released in the U.S. without licensing issues (from nintendo anyway);
Mr. Heli/Battle Chopper
Heavy Unit
Volfied
Atomic Robo-Kid
Space Invaders: Fukkatsu no Hi
Golden Axe
Super Darius
Where in the World is Carmen Sandiego?
More of the Cosmic Fantasy games
Power Drift
Daisenryaku
Xevious: Fardraut Saga
Rastan Saga 2
Last Armageddon
Die Hard