Let's also not forget the core experience that Zelda is trying to create: child-like adventure.
Introduce too many people and npc relationships and story-heavy concepts and you'll take away from the pure joy of adventuring itself. The focus will veer away from the sensation of personal, revelatory exploration, and become more about existing in the society of Hyrule. Link would be visiting less dungeons and talking to more npcs for access to juicy backstory.
I like the idea of a more fully fleshed out world with some deeper subtexts to what's going on, but I don't think that Zelda can remain Zelda if all of a sudden the world of Hyrule becomes more important than the adventures of Link.
... I LOVE Kakariko village. It had great subtexts in The Legend of Zelda: LttP, what with townspeople running away from you and all, but that was just a part of the game to shape the player's direction. Kakariko village didn't exist to give Link greater backstory or juicy town gossip, no way. It was there as a venue for shops, minigames, the blacksmiths, some secrets, and the fourth dungeon in the Dark World.
But Kakariko village done in a Final Fantasy style? We'd have to slow down to talk to everyone, we'd start spending more time in town instead of in dungeons, and we would get trapped in this one dense village to the detraction of all the interesting hills and countryside and caves out there to delve into.
And when it boils down to it, Zelda is about a sense of adventure that calls to mind exploring a wooded countryside as a child. This experience is often solitary, often completely self-contained, and oh-so magical because of that level of child-like innocence and purity.
~Carmine M. Red
Kairon@aol.com