I honestly do not understand why so many people are upset over the C&D deal. Look, it is Square's right to do so, as their copyrighted material was being used, albeit not for a profit. But that does not matter in the eyes of the law. Sure, I think they're dicks for doing so, and it's not a good PR move, but again they can do as they please with their material.
That being said, they maybe would have been better off if they had embraced these projects or at the very least let them be. Look at companies such as Valve, who support fanmade work, as should Square since most of their fanbase is made up of FF7/CT zealots (no pun intended).
But on the other hand, maybe would-be hackers and the like should be a little more hush-hush with their projects and just release them whenever they can, as a surprise of sorts. Sure, they may not get the motivation from whatever hype they could cause by telling the world about their latest projects, but at least they would be able to quietly release their work and after that...well whatever happens happens.
I'm sure some other poster(s) have basically said what I just did, but yeah, I'm not gonna go through 48 pages to find out.