There's several sayings that answer your question fairly nicely,
1) Exceptional is the exception. This is for all art and creative works. Inspiration for the exceptional comes and goes. Sometimes developers are going to develop a game that maybe not innovative. It's still solid and still sells well, but when it comes to the test of time, it doesn't stand up. Nothing wrong with that. That kind of iconic status almost has to happen by accident.
2. Hindsight is 20/20. Okay, so do not diss the PS1, N64 and Sega Saturn era if you didn't live during it. I'm afraid to say it, but you were born after 1990, you basically have no right to diss that era. Here is why.
That era was a time when the entire market was turned on its head with new technological innovation and no one knew what to do with it. No one knew how to make and market a 3D game. No one knew how to do 3D level designs. No one knew how to create 3D characters. No one knew how to do 3D cameras or even an aiming system. Why? Well, because the industry standards and guidelines on how to do those things, didn't exist. No one invented the techniques yet and tested them on the open market. So everything was guess work. So you're basically doing the same thing as complaining that Marco Polo didn't use a gas engine. Um, yeah, because it kind of didn't exist, moron.
Hell, no one even knew there was an adult gaming market! Sony took a huge risk thinking they could make more mature games and they would actually sell, because the attitude back then was that games were for kids. No one knew you could sustain an entire market just on adults.
So there was a lot of experimenting going on during the Playstation, N64, and Sega Saturn era as far as how games should be made and marketed. You say they "should have waited until the Dreamcast." Which is what an idiotic thing to say because guess what? Dreamcast was a commercial failure while Playstation and N64 weren't. So... think about that for a second.
Remember, we're in an experimental phase of gaming. You're still figuring out the market. You don't know yet how to make a 3D, but you're learning and you have millions of dollars at stake with your own game console. The Dreamcast just failed. What part of the Dreamcast's design, architecture and marketing strategy are you going to incorporate? If you're smart, you wouldn't touch the Dreamcast with a 10 foot pole. Not until market analysis is clear as to what exactly failed and that can take years.
So no, you don't wait until someone else invents something, because there's no way to know, until its tested on the market if that idea would actually work.
So why did we tolerate these games? We didn't tolerate them. We thoroughly enjoyed them. Despite their flaws now, they were still the best the market had at the time.