But you just so happened to join the one community (mostly coming from Halkun) that thinks Square is out to get them. In-fact there is not even a single case where Square interfered at all in anything related to it's Final Fantasy IP.
That may be true. Perhaps it's also true that Square(-Enix) has a worse reputation than deserved when it comes to shutting down projects. However, I'm not aware of any Final Fantasy equivalent of Chrono Resurrection. That is, a project based on Square's IP that looks better than its source material. When Chrono Resurrection and Chrono Trigger: Crimson Echoes received their C&D orders, they were 4 months away from release and "98% complete" respectively. This, to me, indicates that Square(-Enix) doesn't worry about projects based on its IP because many of them fail, are sh*t, or don't get released. When it's a good project that looks like it's going to be released though, they pay attention.
Course it could happen. But so could getting stuck by a meteor. Cept' getting stuck by a meteor has actually happened, Square sending a C&D to a Final Fantasy project has not. So odds are much much lower.
That's not how probability works
Calculating odds is difficult without relevant data. I mean, how many decent, cohesive and fully playable Final Fantasy projects (not mods of the original game) that look better than the source material are there? None that I know of... Most of them are bits and pieces, low quality, etc. (again, that's only what I know of though). You would need a FF project that has the same relationship with its base game as Chrono Resurrection did to its base game to be able to know whether Square's shutting down of that project was a one-off thing or a consistent policy it intends to enforce.
Personally, as someone who's worked (technically still working) on a project based on Square(-Enix)'s IP, I'd rather not take the chance of investing many hours of work into a project only to have it shut down. I don't know what the likelihood of that happening to Mako Dawn would've been, but I did plan on making a high quality product. As Bloodshot mentioned above, I don't have the resources to fight a C&D even if I weren't doing anything wrong. Besides, it's so much more flexible to have your own IP to work with, which is the biggest selling point for me. You get to take the elements you like and change the ones you don't.
PS: I may be wrong about some or all of the things I've said. I reserve the right to not stand by anything I've said.