It was a mistake for MS to let Epic go. Now they don't own Gears of War. Not smooth MS. MS should also be punched in the gut for letting Bioware own the Mass Effect rights (though Bioware is promising that they won't release the series on PS3 so if they aren't BSing, then it's not really a loss for Microsoft. Whether you play Mass Effect on 360 or Microsoft Windows, Microsoft is making money somewhere. Yeah MS doesn't get royalties for the PC release but since the game is Windows exclusive, you have to buy a Microsoft OS to play it. That's money in Microsoft's pocket. Microsoft indirectly benefits from PC gaming because a lot of PC games out there won't work with Linux or Mac)
As for Mistwalker, it may be worth it if the price is right. If not, MS owns Lost Odyssey and Blue Dragon anyway so unless we never see a Lost Odyssey 2 or Blue Dragon 2, Mistwalker will continue to work with Microsoft and release 360 exclusives for them. It would help if Microsoft collaborated with Mistwalker again to create another MS-owned IP for Japanese audiences (and western gamers who want more Mistwalker-developed games). Why stop at just Lost Odyssey and Blue Dragon? Mistwalker is valuable studio to do business with.
Microsoft also has a good working relationship with Itagaki (whose off doing his own thing right now), who is very Pro-Xbox, and the From Software guys are tight with Microsoft too (despite their previous working relationship with Sony with the development of Demon's Souls. They've developed multiple titles for Microsoft Game Studios). They also worked with Tri-Ace once (Infinite Undiscovery) and since Tri-Ace is independent, I wouldn't mind seeing Microsoft work with them again. Feelplus also worked with Microsoft (helped Mistwalker with Lost Odyssey).
There are plenty of options for Microsoft (Mistwalker, Tri-Ace, Feelplus, Itagaki and From Software as well as other indie developers they could consider like Level 5 and what not) but MS doesn't seem interested in Japan at the moment, which is a shame.
Essay Pro