I'm pretty sure Nintendo internally also worked on OoT 3D. I read an interview (I think it was an Iwata asks) where the sound engineer at Nintendo was explaining the challenge of simulating the N64 sound on the 3DS. I'm almost sure he was internal to Nintendo.

I'm not surprised if they pulled a guy from Nintendo every now and again to consult on matters, and especially to oversee Grezzo's work. I am a bit surprised they had folks doing it full time though. Maybe Grezzo doesn't have its own sound folks?

I think it's a sound idea! They will be able to release games more often, AND strengthen their ties with 3rd party developers. I see this as a win-win situation. And I wouldn't be too worried about how the quality would be effected by doing something like this; they still got Shigeru Miyamoto to keep a watchful eye over the development. As long as they don't let 3rd parties develop the games all by themselves it should work out just fine!

It's possible, but I'd be more inclined to think that Nintendo handled a minor share of the taskload internally.

Since I'm here let me answer OP.

I guess that working with 3rd party devs opens Nintendo to a whole new world, opens the vents so to speak. It's true that cross-pollination could lead to "infection" from the outside, but to be perfectly honest I'm personally of the opinion that Nintendo was in the past too internally driven and didn't evolve at the same level as its peers in the industry.

Now, of course, don't get me wrong, I love Nintendo's games I am attached to them strongly. But, I do see here and there many cases where other players in the industry implement a certain aspect of a game better than Nintendo would, something that could be applied from one game to another. As an example, Zelda SS only started to include the concept of incremental weapon upgrades. It was there in alttp, but but it was done more properly in SS. This is something that for example diablo has been doing for a long time with its plethora of weapons and armor to choose from, or even final fantasy. I understand that it's a design choice, but the weapon/armor aspect of SS just felt more up to date. Another example would be online connectivity. Some companies have a good online setup, like COD for example. Game-matching is easy and they have cool features to make waiting for a game less boring (some fun stats, the games start relatively quickly) the interface is fluid not tedious to navigate.

I could find other examples like script and general mood and attitude of games, but this is just a start. Look at Project X (Xenosaga/xenogears), and you start to see that Nintendo, thanks to Monolith, is building on something new that appeals to gamers, something more evoking involving mechs and darker worlds. And that's 1st party.

Granted, partnering with japanese studios wouldn't help as much as partnering with Western studios, since Japan itself is kind of self-sufficient in general, but even then since Nintendo's self-sufficiency is so stuffy, even japan is a good start.

Imho, the risk of Nintendo losing its DNA in these partnerships is an over-worry, because imho Nintendo can't lose that part of itself, that's what makes them special, but I believe that working with other publishers could propel them to even greater heights and greater excellence.

A person is always who they are, but they can expose themselves to other contexts to bring out new colors of their individuality. I believe it's the case for Nintendo, in that this would be an experience they would only benefit from.