In case anyone's interested in more, GZ and I attended a localization panel at PAX East and it was posted up on Youtube.

I personally prefer textual articles, but this panel was very well done, put on by Alexander O. Smith & Joseph Reeder (who did FFXII, the FFT Remake, Tactics Ogre... Mr. Smith also did Phoenix Wright, so they're not all high-brow pseudo-Shakespeare).

1st one of 4 is here: http://www.youtube.com/watch?v=L9GwH82kQGY&feature=player_embedded

A brief summary for those not interested in watching the 80 minutes or so...

• In "The bad old days", they did things roughly the way we do (Mega Man Battle Network used as an example).
• Most recent project, Tactics Ogre, used Google Wave. Having used it some for other purposes, translation would work really well using it... too bad it's dying.
• FF7 was done in around three weeks by a bilingual employee of Square who wasn’t familiar with writing (one of the big issues; to be able to localize, you need to be able to write).  Its justified mocking here was the main reason Square started forming an actual localization team.  Off course that makes sense. On the other hand, both of the panelists praised Ted Woolsey for not going full-literal, and said they were hoping to do a panel with him at another PAX.
• The names in Phoenix Wright were decided upon collaboratively. The translator put together lists of first and last names for Capcom to pick from.  His original top choice for the titular character was Roger Wright for the double pun on his original name, Naruhodo (“I see”).
• One of the biggest issues in localizing FFX and FFXII (I think the former had more issues in this dept., personally, "old man") was that there was no budget/tech to modify lip syncs for the language.  Thus there is a lot of people saying “yep” and “nope” in FFX – the fastest to say – and in FFXII, there is a good deal of dialogue crammed in wherever the speaker’s mouth is offscreen.
• We (the US) missed out on something really big.  The implication was that the Kajiya guys were working on a project that got canned.  Some speculation – FFXII International Zodiac, SaGa2 DS (ha, only I care about that) and Xenoblade would’ve been my guesses.  Some major project that never made it stateside.
• Asked specifically about fan-translation, both panelists said that it was a net positive partly because it gets people talking about localization.

Yeah, that was an overly-generalized statement and not quite what I was going for. Sorry about that. 

What I meant was that they worked directly with text files, often directly extracted from the game with no context. Reminded me of projects working with hiragana-only, often out of order.
Another complaint was working with letters-per-line restrictions (they praised the Tactics Ogre team for allowing three lines per chunk of dialogue in localizations, despite Japanese using only two).

We have the luxury of modern machines and programming techniques, a significant amount of general documentation (and an awesome, helpful community), and most important of all - no deadlines. I think things are much easier on us, since we're able to work smarter and have a lot more knowledge now than developers did then.

It makes all the difference in the world if you have access to the original development team, source material, or source code. Those are luxuries we have never had. Now, I have seen some SNES era official source code and some of it isn't much better than a trace log, but it still is better.   

Well I would vouch in for a few SNES games including expanding Zelda 3 more cleanly, maybe add an expansion for Sim City, and also how to reformat some of the DQ games, including implementing a dual language support, a how to on Fixed Width font formats and compression sizes, and add some features on it as well, but I am sure they may not go for it since the DQ stuff is still being made by Square Enix who don't want their older games being modified and such due to current licensing and copyright issues.

But those are my thoughts.

And while this thread is still bumped... I'm pretty sure the cancelled project they were referring to at the localization panel was "Front Mission 5". (Assuming it wasn't something they were working on recently.)