The easiest way for Sega to get back on form would be any of a number of ways.

First they need to downsize. Sega has 3x as many employees as Nintendo, and makes 1/10th of what Nintendo makes. With less staff, that means more capital in the company to invest in new or better staff, as well as giving existing staff a pay rise as an incentive to try harder.

As well as downsizing, they need to focus their energies. They are developing for too many platforms, period. Off the top of my head, they develop for DS, PSP, PS2, GC, Wii, PS3 and Xbox360. Good staff are hard to come across, and do you think Nintendo games would be as good if Miyamoto had to try and contend with working on so many different ports, versions and platforms? Naturally with time constraints, something would have to give. Although Miyamoto is quite exceptional, he would probably start throwing tables around and delaying stuff so it didn't suck, but few staff are in such a position as he and they have to stick to deadlines and make sacrifices.

Reorganize. A lot of key people have since gone from Sega since the good old MegaDrive days, and they had an internal shuffle. It doesn't seem to be working, and mostly the only good division is what's left of AM2. They could either pool AM2 together and have one awesome division, or spread AM2 over the other divisions, I don't know what would work best, but something isn't working right now.

Outsourcing. I gather that Sega aren't the only ones making Sonic games; that is other developers (I guess you would call them second party to Sega) are making them. It's kind of like how Intelligent Systems made the excellent Super Paper Mario, except Sega is sadly lacking the excellent. Less outsourcing would allow greater control over development, and hopefully raise the quality.

Another option would be to outsource to... Yep; Nintendo. Sega and Nintendo have a strange relationship right now. Nintendo allowed Sega to make an F-Zero game on the Gamecube and Mario and Sonic at the Olympic Games with supervision by Miyamoto, and Sega has also co-operated in allowing Sonic to appear in Smash Bros Brawl which sadly is probably the only game to star Sonic in recent times that won't suck.

I would hope Sega would consider outsourcing to Nintendo. I know the industry has been turned upside down in recent years, and Nintendo developing Sega's key franchise would sound 110% whack (I couldn't/wouldn't imagine Sega making the next Mario game...), but it would work. Mario games have always been regarded highly, and 3D is something the Sonic games have never quite got right. If Sega would even at least take some tips from Nintendo it may help.

It wouldn't have to stop at Sonic. Sega could also co-produce/outsource a new Golden Axe, Streets of Rage, Shinobi, Panzer Dragoon etc. with Nintendo. It makes perfect sense at it would save Nintendo time and money because they are working with existing IP rather than having to come up with something new (which they seem a little unforthcoming about), and for Sega it means a string of quality games based on their IP which looks good for Sega if it's an awesome game and says Sega on the box, helping to increase brand awareness/loyalty.

In short, I guess I'm just trying to justify my ideal world, which would be Sega cutting down in size a little, dropping many of the other consoles and effectively becoming second party to Nintendo, a bit like Rare used to be.

I had a NES as a kid, moved on to MegaDrive as a Christmas present, and that's the console I basically grew up on. Then I moved on to SNES for a while and then N64, and lastly Wii (I missed out on the GC because I got into PCs for a while). I hold both companies in high regard and it kills me to see Sega producing substandard games. I really don't want to see them become the next Ubisoft or EA.