@Skylark: Well, I would assume the art director and character designer would try to collectively produce art that sets a consistent tone for the game; it'd be a little weird to have Akira Toriyama's designs running around in Chrono Cross's lush, hand-painted-like backgrounds, even though Yasuyuki Honne was the art director for both games.
@Redandblack: I like Arakawa, but I think her biggest strength by a long shot is drawing facial expressions - without them, her designs are a bit plain. Needless to say, those strengths and weaknesses are pretty much the opposite of what one would look for in a video game character designer. Watsuki draws both distinctive designs and great faces, and his lush and detailed style would lend itself to a video game. I'm assuming, of course, that Chrono 3 would be closer in tone to the darker, more "realistic" Radical Dreamers and Cross than the comparatively whimsical, cartoonish Trigger (I hope so, anyway).