There are currently about 9 other Final Fantasy or Square based MUDs (one is even called "The Unofficial Squaresoft MUD") listed on the main MUD listing site, so MUDs based on around Square IP isn't unheard of, and in fact, the first one I started developing on got started about 10 years ago.
There is a history of flying under the radar.
I guess my biggest dilemma though really comes from the concern that this move against CE is a show of a genuine "We don't want fan projects based on our games" whereas previous C&D from them seemed more of a concern over protecting revenue. I understand them shutting down the CT Remake because that could cut into revenue in re-releasing the game, such as they did with Final Fantasy Chronicles and Chrono Trigger DS. Something like CE has really no chance of cutting into revenue. No one is going to choose to forgo playing CT in favor of a fan project... if anything, projects like CE simply prove that there still exists a significant market for future Chrono based games and helps keep interest in the series alive.
I genuinely believe fan projects have far more benefit than anything. Afterall, if it weren't for the immense amount of FF7 based fan projects, fan fic, websites, etc. out there, I can't imagine they would have ever revisited that world for the many spin-offs they've made since.
Certainly, the names, characters, likenesses and all that is their property and it is ultimately their decision on who can and can't use them, but things like this seem like a slap in the face to the fans.
Ultimately, I don't want to feel like I'm doing something wrong, something I need to keep hidden, something that I feel a need to "fly under the radar." Ideally, Square would understand and appreciate the immense amount of work and effort their fans are putting into keeping interest in their games alive, and let fan projects like this continue without a problem.
If there is a Chrono sequel on the horizon we don't know about, maybe I can understand why they would pull the plug on CE, but otherwise, this just seems like an example of a big corporation picking on the people that helped them become a big corporation.