Rare had all the freedom they needed when making Perfect Dark Zero, Banjo Nutz and Bolts, Grabbed by the Ghoulies, Kameo, Viva Piñata, Conkers Live and Reloaded etc. I wrote a whole article about this ages ago.
Rare was underperforming and instead of MS sitting back watching Rare destroy all there IPs, MS asked them to make Kinect games which Rare was very successful with. Kinect is possibly the reason MS never closed Rare down due to the amount of success Rare had. So we should be thanking the move and Kinect for that very reason.
MS only recently gave Rare all there freedom back where Sea Of Thieves was made, which turned out to be a success. Rare's next project is also out of freedom while we must remember that Battletoads isn't made by Rare, its made by a Indy studio DLaLa. Much like Killer Instinct wasn't made by Rare either but instead Double Helix / Iron Galaxy.