That's different though because it's optional. FinalEvangelion is talking about MS allowing Square Enix to make FFXIII so it only runs if there is a hard drive attached with enough space on it so that they can overcome certain technical issues that may arise, so in that case it would be mandatory.

For example, what if you have a big open world map where you can go where you like. At some point it's going to say "insert disc 2", but what if you turned around and went back the way you came? Does it say "insert disc 1" again? It spoils the free roaming nature of the game. I don't know if this will be an issue with FFXIII, I'm just using it as an example.

Lost Odyssey worked OK on multiple discs and that had its fair share of cut scenes too.

What soccerdrew17 and horriblebastard said

Luckily, LO and BD were made with 360 in mind through the entire development process. With FF XIII, they haven't even started thinking about the 360 version (from what recent interviews indicated) and are just working on the PS3 version.

In LO, [SPOILER]I remember a good portion of the world was blocked out until the 4th disc, where everything was accessible again.[/SPOILER]

It depends on how much they want to keep the quality or if they don't mind over-compressing, if it becomes an issue.

And look at the problems LO had, i played the game for 2.5 hours and their was constant loading and a FPS that was all over the place.  The game was also not the best looking thing around either.  FF13 is going to blow LO out of the water graphically, and with little to no load times i don't see how they will not use the HDD or somehow force the game onto atleast 5+ discs.  I would also imagine they don't want a frame rate problem either.

Only because not all 360s have hard drives.  Installs make games load faster and therefore are a feature.  Devs love them.  Sometimes we need to erase installs to play new games.  We don't cry.

I doubt it, because then it stops a decent chunk of 360 owners from playing the game

LO was par for the course in terms of load times and such.  mrstickball is right.  And 2.5 hours is a wierd amount of time to play LO.

When you have a lot of games and more then one of the same console it is unfeasible to copy games to a hard drive.  Managing storage and installs is not something I am interested in for a large portion of my games.  I like optional installs because it allows me to decide which games I really want on my hard drive vs. ones I would never want on my hard drive.

As for load times that is only a problem with blu-ray players in the PS3 because they are that much slower then the hard drive.  It was a trade-off Sony chose in the design (storage over performance) which is fine, but it creates an issue that people end up having to do maintainence on their system whether they like it or not.  Installs should be optional, not required.

As for developers, of course they love hard drives.  It is easier to right code and not be forced to make it perform as efficiently as possible.  I've been involved with software development for 18 years now, and if you ask me whether I want more storage or right more efficient code I will take storage everytime (and literally, I have gambled on that with software I have created).  It is much cheaper and faster to right regular code rather then efficient code (That doesn't make developers lazy, it is giving the people paying for the development options to reduce development cost, for those of you who like to call devs lazy).  And with some consoles being more complex to develop for then others, that could be the difference between a profitable and unprofitable game.

MS doesn't place restrictions on companies using the HDD. For example Oblivion uses the HDD extensivley to help with loading times. SE will have the same freedom, they just need to make sur the game can work on models that don't have an HDD

I expect it will have an option where FF XIII could be downloaded to the X360 to reduce load times by up to 40%.

Were their cutscenes pre-rendered to the nth degree? 

SE loves their pre-rendered cutscenes, this may pose a problem.