TeamSonic

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Sega has a good reputation for games, and a terrible reputation for hardware (at least post Genesis)

The reason for this has to be Sonic-team. Creators of, of course, the sonic series - and also all else that is good about the DreamCast.

ChuChuRocket (insane game where you herd mice into rockets.)
PhantasyStar
CrazyTaxi?

and many others.

The success of nintendos similar team (Zelda, Metroid) suggests that having the hardware guys next to you is a big advantage when writing software.

But I've *met* hardware guys. I just don't see how that could possibly be true ;)

Perhaps it's the unlimited budget...