It could be both, right?
There are people using the Dreamcast for VR now, maybe that was a feature Sega was planning on launching back in the days, then never had time to develop when they crashed
https://www.thedreamcastjunkyard.co.uk/2016/09/dreamcast-vr-roundup.html
And Dreamcast had pinball games. Take Pro Pinball Trilogy, for example, Apparently distributed only in Europe. I wonder if this could have been a prototype for a Japan only release, that would explain the Junji Ito theme.
All this It doesn't mean that they didn't put it in a pinball cabinet like the one in the photos. I'm thinking of the custom Death Crimson Cabinet,
https://www.asahi-net.or.jp/~bu9t-sm/crimson0.html
people love a weird cabinet!