Paying something like 250million $ in Nintendos situation back then, wasn´t really viable, it was shortly after N64 and early GC days. Considering that you never know what happens with the talent after a buyout it was a very big risk, because you might end up with a lot of developers without the leaders to direct them accordingly. If you also add the human component, I mean despite all this beeing a business I wouldn´t be surprised if they felt betrayed by the Stampers brothers after alle these years, so I´m not too suprised they didn´t want to make the Stampers Brothers even richer by buying them out.
Rares departure surely caused a hole in Nintendos lineup especially during GC days, because in colaboration with Nintendo they really created popular games together. But looking at Rare today, it´s clear who got the even worse deal, none of the classic Rare IPs became blockbusters on the Xbox systems and if it weren´t for the very successful WiiSports rip-offs, Rare might even have been Lionbeheaded as well by now.
From a gamers perspective I really think that an ongoing Nintendo+Rare relationship would have lead to more prolific games. Perfect Dark, Kameo would have been launched during the 128bit generation just an example of how much time they wasted due to all the structural changes they had to go through due to what happened.
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