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The last I heard, Dragon Quest development is now done by Level 5. Square doesn't have anything to do with it other than ownership now, as far as I know.
Crystal Chronicles isn't a great example of good relations; everything I've heard says it was a sub-par game. It's a big step to go from two exclusive games to a collaboration like SMRPG. If Nintendo hadn't dropped the ball on bringing out a CD system, the relations would be a lot better.
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