Oh, and as for the actual question.

It's all a matter of SE trying to reach across the Ocean. They realize that there is way more money to be made in America and Europe then Japan.

They want to try and figure out how to make JRPGs work out west... or even not JRPGs if that's what it takes.

They'd drop Final Fantasy and DQ in a second to make generic First Person Shooters if they could break into the US market in a real way.

Though right now they're changing FF which is popular in the US already, to see what could make all their RPGS popular in the west. (different gameplay being an example.)

The money no doubt is to try and keep the Japanese market when they develop this "new brand of JRPGs."

Square-Enix dropping DQ and FF is like Nintendo dropping Mario and Zelda.

Dragon Quest is keeping the same "traditionality" and Final Fantasy changed a lot. People say things like "woow, the Dragon Quest style is sooo outdated!" but that's one of the best things in the DQ series, that's what makes DQ a traditional and familiar RPG.

Now Square Enix is trying to revive the series by force, but the series will probably get worse.

FFIV will decide if the series will start a big decline or not. Why? Because an online Final Fantasy game never was a good thing (this can make the series die) but now we have consoles with a much better online capability and a bigger online community (this can make the series revive).

Wada entered Square at what year precisely? 

I agree with your last phrase entirely, Enix was my favourite publisher in the SNES days mainly because of that, they supported a diverse lineup of really good IP's that could have had a huge impact if they had been considered into future gens.  

I want to see a Dragon quest / FFIV-IX mixed game

Naum said: I want to see a Dragon quest / FFIV-IX mixed game

Well, there's one game.  But it never was localized outside of Japan.  Shame really...none of the games in the series have been.  Another good series by Dragon Quest creator Yuji Horii.

As for a full-fledged Dragon Quest/FInal Fantasy RPG....I would have thought they'd make one of those by now.  It's pretty much an instant money maker for SquareEnix in Japan and probably would do wonders to promote Dragon Quest in the west.  Should be a no brainer....but what can you do.

If you're saying they need to spend less on Final Fantasy, and more on Dragon Quest, I'd agree. Final Fantasy is already well known in the west. If a large Dragon Quest advertising campaign can bring it to even a third of FF's popularity in the west, that'd be great. Since SE is forced to make DQ as amazing as possible for Japan, it'd be a huge bonus getting western attention on top (the quality of the game will hopefully speak for itself).

Now, if you'd ask me if they should make more Dragon Quest titles, I'd say no. I think one of the reasons it has remained so strong is because there's a significant amount of time between each main release, not unlike how Nintendo treats its own solid IP's. They're treating the series just fine in Japan.

SE is spending way too much on Final Fantasy in general. They definitely need to diversify their lineup, sticking "Final Fantasy" on every game they make (see Crystal Bearers, or even anything Crystal Chronicles) is not the way you treat your top brand. Wada seems to think like Activision does nowadays - create one big hit, then farm it for all it's worth. This doesn't seem like a good long-term strategy.

It is time they start trying to either create some new IP's, or revive older ones. I know the issue is the home consoles' development costs, so I'd suggest giving the Wii a shot, but who knows...

Final Fantasy has always been about having that one, huge, epic, flagship title and then having tons of spin offs from it which can sell 1 million+. Even if FFXIII didn't make a profit (I'm sure it will), they'd undoubtedly cash in on Versus, Agito and the inevitable DS, PSP, Wii, iPhone, PSN, XBLA blah blah blah spin offs and whatever else they can think of.

Dragon Quest is pretty strong at this too, but I'm sure once you look at global sales you can see why SE put so much more into Final Fantasy - it's a bigger potential audience.

The future for SE though? I think you're looking more at Tomb Raider, Batman:AA, Just Cause, Kane and Lynch, Hitman, Deus Ex and Theif :P.

I completely agree.  I think the way they've handled the Dragon Quest series is perfect and I don't want them to start jumping on that series if they think Final Fantasy isn't working.  However, my examples were just to show you that, hypothetically, they might be able to make the same amount or more money off a cheaper to produce Dragon Quest title for DS or Wii (that only sells well in Japan) than a Final Fantasy game that takes tons of advertising, a lot more production costs and etc.  And if they were able to also get Dragon Quest popular in the west, then there would be no question what they should do.

If Dragon Quest IX sells a million or more in the west with Nintendos help in advertising, I think we'll be seeing a change in SquareEnix approach to making games.  That's 5-6 million in sales for a DragonQuest title alone.  And a DS title at that.  The complete opposite thinking for SquareEnix which usually backs its marketing and attention behind major console games with high production values and CGI cutscenes (aka Final Fantasy and Kingdom Hearts).