There's no question it was possible, but the previous generation consoles provided powerful hardware sprite/tile-based engines with layers, smooth parallax scrolling, '2.5D' transformations and more. N64 has none of that, and as far as I know the SDK didn't include anything like a software 2D engine either. If you wanted to make a 2D game, you'd have to implement your own 2D rendering pipeline more or less from scratch. I also think the N64's relatively low memory bandwidth and low amount of RAM would have been an issue to get past for a software compositor.

So yeah, it does provide access to the framebuffer, and has a reasonably capable CPU - more or less like PCs of the time did, so of course it's a 'perfectly capable 2D platform' but in this era I don't think we were quite at the point where brute-forcing the graphics pipeline in software was 'easy', and the 2D hardware capabilities were... let's say 'not exploited' by Nintendo's SDK.

It wasn't preventing anyone from producing 2D games, obviously good games could be made, it was just definitely not optimized for that, and that just put more pressure towards 3D, that already had a lot of cultural pressure towards it. If the culture was there, I'm sure developers would have hacked away at it and developed it into a strong 2D platform, but without that it was a barrier.