Does Square Enix have the legal right to do this ? Yup.
Does Square Enix desire to make a profit ? Yup.
Do either of the above have anything to do with whether the decision is right or wrong in a moral sense ? Nope. In a perfect world laws might reflect morality but this isn't it. I'm a little concerned with the way that morality seems to be reflecting laws though, since it seems that if you can lobby for legislation you can effect public perception in ways that are directly contrary to public interest, but meh, that's a debate for another time and place. And the second is more likely to contribute to an argument against moral justification than for.
Do I hate Square Enix ? Nope. I just don't care for the larger percentage of games they release these days. That's the way the industry marches. I still buy games that interest me from them.
There is also only one type of IP you have to vigorously defend in order to avoid losing it: Trademarks. And its highly questionable that some of the claimed defenses of trademarks were necessary (single natural language words in a descriptive context). You can be as selective as you wish in the enforcement of copyright or patents. As far as I know there is no legal requirement at all to defend either of the above. Well, beyond their limited lifespan. Which is moot in the case of copyright (it lasts longer than most people living when a product is released will continue living) but valid in the case of patents.
People who said this wouldn't happen:
I was one of the people who said this wouldn't happen. This is the first time I've seen an actual fan translation, that wasn't for a porn game, C&Ded.
This patch was on thinner ice than most (the patch basically includes a combined data file containing the data for both UMDs which is placed into the ISO) whereas the translation standard is to release patches which essentially contain only binary differences that are then patched into the correct place. I'm pretty sure it would have been possible to release it similar to that, but it would also have been considerably more difficult to use, first you'd have to build the merged iso, from the 2 base ISOs and then apply the diff.
As to CFW PSPs: It depends when you're talking about, during its early life, hacking it was trivial, in the middle it required hardware initially*, at the end it was literally putting a file on the memory stick and starting a program. So for most of its life, it only took knowing a guy who knew a guy. That means that a lot of people had CFWs , but it also means that the percentage of those people who could do more than run prepatched ISOs was smaller than usual. It's also probably not really germane to the current debate, I'd guess that most people playing Type 0 now, are using emulators since the PSP has basically been a dead system for 2 years at this point.
*A CFW PSP could create the necessary hardware once it existed.
Regarding early / late announcements and "bitching": There's a lot of room between 3 years before the Japanese release and 3 years after the Japanese release, if you want a good time for announcements. I'd personally suggest trying a range of about 1 year either side, if you don't want people complaining.
I will sigh if he calls it source code in the writeup.
I've long since given up expecting correct terminology or even a passing understanding of the field in writeups. It used to bug me but those days are gone now. This translation isn't carrying source code unless the original UMDs and/or PSN release do , in which case that cat is loooooong out of the bag.