I agree with your basic premise, but I think the complaint about ME3 was that it didn't reflect any previous decisions you made in the ending, not that the story failed to fork exponentially at every decision point. Indeed, IMO, ME3 did a really good job of making it feel like your decisions matter...until the very end.

Star Ocean: The Second Story is yet another example of an RPG that does this; it has 70-80 endings, many forking paths including mutually exclusive party member choices, relationships between characters, etc. The trick for making it feasible seems to be to make the ending modular so that it includes/removes different cutscenes based on what happened before. As I understand it there are quite a few old-school RPGs that do this.

Of course it is harder if you are talking about voice acting and super-detailed 3D assets. But assets aren't that hard considering you already made most of them for the rest of the game, and realistic voice synthesis is perhaps not that far away. So I don't think most people were expecting model (B), but even that could be viable if you controlled the number of forks carefully.