The real reason why Nintendo dismissed Rare was because it was too big (more than 2000 employees) and Nintendo both wanted to work with small teams and concentrate their management and development focus in Japan. No secret why shortly after Rare's departure they got rid of Left Field, Factor 5 and Silicon Knights and downgraded NST.
You probably meant to say 200 here, didn't you? I imagine trying to fit over 2,000 employees at Rare would not be an easy task. ;)