"Link doesn't need to talk. If Link talked he'd lose a lot of his charm, people have in their mind what link sounds like. We don't want to ruin that."
I'll argee that Link should never talk (though I do know what he sounds like from all the "yah" stuff Nintendo loves so much they almost ruined the GBA port of LttP with it) but there's no reason to associate talking with an RPG. Mario didn't talk in Super Mario RPG or Paper Mario and it worked fine.
For those of you against the idea I think most of you are making two rather silly assumptions:
1. That regular Zelda games won't be made anymore if a Zelda RPG is made.
2. That a Zelda RPG, if it was made by Square or not, would become a boring FMV fest.
Neither of those are guarenteed to occur. Newsflash! It's possible to make an RPG that doesn't suck. There are RPGs that don't have any FMV, don't have random battles, and have enough real time interaction and puzzles that it feels like you're playing not watching. They're made by Nintendo and star Mario as the main character. Those not only are quite awesome (I greatly prefer Super Mario RPG but I do think Paper Mario and Superstar Saga are still good) but they're reasonably loyal to the atmosphere and feel of the original franchise.
The Legend of Zelda RPG could be amazing. Don't be so close-minded and think beyond Final Fantasy. Think of Ocarina of Time but with a world big enough to require an overworld map, menu fighting, a party, stats and exp, and upgradable weapons and equipment. Imagine that the dungeons still have real time puzzles as well as battles with non-random always-visible enemies that you battle with. Imagine full 3D with battles that take place where they are encountered like in Chrono Trigger. Imagine real time elements to the battles like timed hits, timed blocks, and pre-emptive strikes (Paper Mario style). Imagine spells and items aquired having real time usage outside of battles (ie: hookshot). Imagine each character having specific abilites like in Final Fantasy VI (Link can attack with his sword, arrows, boomerang, bombs, etc; Zelda uses magic and can change between Zelda and Sheik thus having different abilities in each form; a Goron character can use a rolling attack). It's not hard to think of how to make a good Zelda RPG.