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Assassin's Creed, Oblivion, and Fallout 3 have had no problems making towns and turning a profit while doing so.  I don't see why it would be that damn hard to do the towns in Final Fantasy VII.  Not saying that it'll be a good idea, but the Japanese developers this generation have done a lot of whing about how hard it's to develop for PS3 instead of embracing the power of it.  (Kojima made similar remarks in the making of MGS 4 companion disc).