I really, really hate those fairies / dwarves.

[Kodokami]

To be fair, the Lagoonates appear later and merely wander around the areas not inhabited by the fairies. The island should be big enough for more then one species to live on. Plus they didn't attack the fairies, nor appear to be fighting or hindering them at all.

Whereas the dwarves outright attacked the village, killing everyone in sight, and attempting to claim the island as their own.

At that point in the game, when the Lagoonates appear, the fairies no longer exist on the island. Whether that means they are simply not seen or have in fact been killed may be indeterminable, but a quote in-game suggests the latter.

[Water Dragon Isle (Home) - If you never visited, don't have Razzly)]
 
Member:
   A monster!?
   W-what's going on?

Member:
   The fairies of this isle
   have been...by them...?
   Heaven forbid!

[Beach Bum]

That is odd. I chose to not do the Hydra Marshes quest, but did visit Water Dragon Isle for the Ice Breath and fought the dwarves. Then way later while coming back to fight the Water Dragon, the fairies were still there and the Lagoonates were only roaming around the other areas.

[Acacia Sgt]

That is odd. I chose to not do the Hydra Marshes quest, but did visit Water Dragon Isle for the Ice Breath and fought the dwarves. Then way later while coming back to fight the Water Dragon, the fairies were still there and the Lagoonates were only roaming around the other areas.

Because you need to completely avoid the island until it is necessary. Getting the Ice Breath is optional after all. And as the script says...

[Water Dragon Isle (Home) - If you never visited, don't have Razzly)]
 
Member:
   A monster!?
   W-what's going on?

Member:
   The fairies of this isle
   have been...by them...?
   Heaven forbid!

There, if you never visited.

[Beach Bum]

Hmmm.... So which version is canon?

Fairies are attacked and dwarves repent after hearing of the Hydra child ? Fairies are attacked but survive albeit with a hatred for humans ? Or fairies are attacked and completely wiped from the island forever ?

I guess this is another one of those "choose what you like best" things.

[gatotsu911]

I think it was more a thematic thing hinting towards the fact that the humans weren't entirely "native" to the planet, since their evolution was controlled by Lavos, and Cross completely did away with hope and free will ideas.

I was with you up until that last part.

[Lennis]

It seems to me that Kato went out of his way to paint humans in a negative light.  The assertion that humans essentially evolved from Lavos conveniently ignores the question of Ayla.  There is also no mention of dwarves or faries in Chrono Trigger, so their inclusion in Cross strikes me as unnecessary.  They only serve as humanity-despising devices by the author.  We can only speculate as to why he was compelled to go in this direction.
 

[utunnels]

Such theme that humans are harmful to the nature can be found in many works. I wonder why they had to play with the cliche. But anyway that doesn't mean I hate it.

Some Ghibili anims also have similar views, I recall. For example, Nausica(if it counts), mononoke hime, or even Pom Poko.

[skylark]

It seems to me that Kato went out of his way to paint humans in a negative light.  The assertion that humans essentially evolved from Lavos conveniently ignores the question of Ayla.  There is also no mention of dwarves or faries in Chrono Trigger, so their inclusion in Cross strikes me as unnecessary.  They only serve as humanity-despising devices by the author.  We can only speculate as to why he was compelled to go in this direction.
 

Hmmm...

Maybe Kato had a sudden crisis of faith in humanity during production, kinda like Anno did with Evangelion?

*shrugs*

[chapapote]

That is odd. I chose to not do the Hydra Marshes quest, but did visit Water Dragon Isle for the Ice Breath and fought the dwarves. Then way later while coming back to fight the Water Dragon, the fairies were still there and the Lagoonates were only roaming around the other areas.

One can assume then that the Lagoonates never take a place on the fairies' dissapearance, the dwarves have already killed them by the time they appear.

Hmmm.... So which version is canon?

Fairies are attacked and dwarves repent after hearing of the Hydra child ? Fairies are attacked but survive albeit with a hatred for humans ? Or fairies are attacked and completely wiped from the island forever ?

I guess this is another one of those "choose what you like best" things.

Most likely the Hydra Marshes quest is canon, and that hydra is killed, that's the only thing for sure.

[IHBP]

Odd that there is so much animosity toward humans considering that those are all man made islands they live on.

[Acacia Sgt]

True, they're man-made, but it's not like anyone outside the staff that remained in Chronopolis knew. Even then, it's still an ecosystem that humans have harmed, so they have reasons to be angry at them.

[EgyLynx]

 
Oh no... no these cute fairys... why them MUST die?

[MoliereS2]

Maybe what they wanted to show was how real life is unfair? in other words, the game tried to take the reality and put it in. 

[EgyLynx]

 
Well... I hope that was viceversa...