It looks like the Atari 2600 is capable of doing quite a bit as long as you have reasonable game capacity to work with.  In other words, it was limited more by game capacity than by its processors.  I feel 32K is a reasonable game size since most games on contemporary systems (such as the Atari 5200 and 8-bit computers) were 16K, and some were 32K, just not as often for the Atari 2600.  Apparently, someone calling the shots thought that there wasn't much to be gained from making Atari 2600 games bigger.

As a quick example, the Atari 2600 is capable of producing two to eight times more colors than many systems that came after it.  The richness of its colors lies somewhere between the popular 8-bit and 16-bit systems.  Taking advantage of the rich palette is only possible with larger game sizes.