I just don't see a Sony buyout as realistic, though I don't think any 1st party buyout is likely. Again, if it comes to it you'll simply see assets sold off (foreign first, then their arcade business) until Fukushima can right the ship. Or if that won't work, they'll merge with another big player (Namco Bandai, Konami, Sega Sammy, etc)
It seems pretty realistic under two conditions: Sony becomes the largest shareholder and SQEX is in serious trouble financially. I definitely think Sony will have a better relationship with SQ this gen considering how close the two used to be.
I'd also say your own love of Sony and hatred of Nintendo is clouding things somewhat too. All SCE/SEN's acquisitions have been foreign companies and Sony's take of SE stock is a remenant of their relationship with half the company over a decade ago.
Sony has had very good relationships with both Eidos and Square soft. The past is certainly not indicative of the future especially given the fact that SE's output has not been nearly as good as it used to be. Sony still have closest relationship with SE.
The president of Square Enix doesn't even consider Sony a Japanese console company anymore thanks to Their overwhelming disinterest and neglect of their national industry.
If he is taling about SCEJ output I can understand and agree. If he is talking about hardware then the answer is no. The PS1,PS2,PS3, PSP have all affected the Japanese console industry significantly. PSP caused the MH craze for goodness sakes. Playstation is definitely a massive brand for the Japanese console industry. Just looking at NB results we can see that over a third of sales we on ps3 and half on Playstation. There is no denying that Sony is a big Japanese console maker.
Nintendo meanwhile has been heavily investing in Japan in general for years now and building long standing relationships with SE's Japanese management and studios specifically. Iwata's also not against M&A if given the right situation and incentive, and I think the possibility of losing Dragon Quest to PlayStation (again) would more than provide that. Any of the other major Japanese 3rd parties and Nintendo probably wouldn't bat an eye (except maybe Capcom), but I think Iwata holds SE at a different level given the longterm efforts Nintendo's made towards working together.
Iwata can try as hard as he likes too but the majority of SE's big titles come out on PS. DQ is not a nintendo Ip as many people would like to think. It goes to the platform that usually has the biggest userbase or can garner the most sales/profit.
With zero debt and a not insignificant warchest, Nintendo could likely match Sony financially too. On the other hand, there's pretty much no way Sony can match Nintendo culturally with how they've (mis)handled the PlayStation business the past decade. But really, the only way I can even see these companies getting involved is if one or the other takes the first step, and honestly that just doesn't seem at all likely.