VGA Box ring any bells ?
The Dreamcast was designed for BOTH TV and VGA monitors. The reason why 2D fighters look perfect on TV's is because of the scanlines (at a 320x240 res). Since all TV's have scanlines there was no need for AA (Anti Aliasing). However since the dreamcast also enabled VGA (640x480) the higher res (and progressive scan off course) made 3D look MUCH and MUCH better then on TV with 320x240. But altho the higher res was good for 3D, it was bad for 2D. When you played 2D games on your VGA box at that high 640x480 res the 2D characters looked very blocky, mainly due to the game being written for scanline purposes. The 2D game companies did put a nice shiny "VGA compatible" line on their game boxes but customars we're always setup for a huge disappointment. On terms of VGA, they could have "emulated" scanlines (maybe we will see this in a feature version of chankast) or at least use a blurry AA effect like the Xbox does. Niether of wich did they use, they probably figured something along the lines of "use a TV it's more arcade perfect"
Anyway, jes my 2 cents worth...