What happened here is really nothing special or particularly noteworthy, but it nevertheless just doesn't feel right. Xseed worked hard to make Falcom's games popular in the west and they even localized games no one else would have touched with a ten feet pole (I remember how shocked people where when Xseed announced they'd localize Trails, a series people thought would never make it to the west). It's perfectly reasonable for Falcom to work together with partners that are able to offer them a better deal, but still, leaving Xseed behind like this just feels disappointing. It actually makes me feel less excited for Ys VIII, as silly as that is.
I wonder if it's related to Xseed not being able to make a PC port. They are really behind the curve on that front, especially considering they were among the first to embrace Steam.
Ah, well. Here's hoping Xseed will be able to continue working on Trails at least.