Mercs 1 Mega Man has become such a notable aspect of the game that this specific incarnation was nommed for an MPFC. (He lost in Round One.)
total robbery tbqh
It's interesting that you say M3 has less "personality" than M1. I think that all of us (including me) have become somewhat jaded about the whole thing -- events that would have been exciting in M1 just aren't as exciting these days. We've had our share of wacky events in M3. A battle on a giant ship perched upon a tiny moving platform on a toxic lake, with a 24-foot-tall intelligent homing boulder chasing after one of the enemy. Marche crippling everyone on both teams and sticking them all in wheelchairs. Berserk 2x speed Amy Rose with gatling gun arms, stalking Denton. The absurdity and potential hilarity is all there. But now that the novelty has worn off, it doesn't feel as exciting any more.
Another issue that you touch upon: Does there have to be a trade-off between balance and fun? M1 was ridiculously imbalanced. In many ways, it was a chaotic free-for-all. Broken abilities were everywhere. Upgrades were ad hoc (like, you'd send in your merc for an upgrade, and the admins were all "hm, what should we give him?") Boss fights with big rewards were randomly thrown in to spice things up. In M3, by contrast, there's been a consistent effort to keep things structured and balanced. We have a carefully scripted power curve so that guys like Sephiroth are not released on day 1. We try not to release broken abilities (okay, this one's not always successful, but at least we don't have things like Mega Man or CATS randomly killing 90% of each team). We have pre-written upgrades. All of these changes, IMO, make for a much better strategy game. But do they also make it less fun? I dunno.
I agree with you that Mercs needs a very long rest before it comes back, if ever. Give it a year or so. Maybe then it will become exciting again. We can hope.
Also, did I mention that Mega Man was robbed? He was so robbed.
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another place and time, without a great divide, and we could be flying deadly high