The Final Fantasy series has been wildly inconsistent graphically since it went 3D. (FFVII was ugly as heck compared to the kind of graphics you saw on PC and N64 at the time.) Not just because the games were held back by hardware -- the actual asset quality was all over the place. Texture quality can be absolutely dismal. And model quality is all over the place. This dog in Lightning Returns is the most notorious example.
You really think Microsoft would allow this? You think their executives would sit there and say, "Yes, this is acceptable asset quality for a AAA videogame in 2013. I don't see any problem with this."
Alternatively, imagine working for hypothetical MS-owned Square Enix and showing NieR: Automata to Microsoft and it looks like this. One of the many reasons why western AAA games cost so much to make is because they generally don't have textures like this. And I think this would have been a sticking point with MS-owned Square.
Final Fantasy XII and its atrocious pop-in and tiny, empty levels would have been met by raised eyebrows by 2006 Microsoft. Sure, the pop-in likely would have been fixed thanks to Xbox hardware having more headroom, but it's reflective of the fundamental difference in development priorities.
Final Fantasy XII fans might not see any problem with its graphics. But the game was essentially a generation behind high end Xbox titles. It was released in 2006. The same month as The Elder Scrolls IV: Oblivion. There is no universe in which Microsoft would have been happy with its graphics.
edit: In case some are confused, I'm not saying that the Final Fantasy series has "bad graphics". I am saying that they did not meet the minimum asset/visual fidelity quality a company like Microsoft would likely demand. In order to make a game that would meet Microsoft's expectations of visual quality -- this would cost a lot of money. These games would need to sell more copies to make their money back.
Graphics are just the tip of the iceberg. If MS owned Square, I doubt they'd be releasing games without full voice acting. Heaps of FFXII's dialogue is just text. That would never have flown under MS. But again, fixing this would have cost more money. And more money means the game has to sell more copies. And if doesn't sell enough copies MS would be unhappy.
