The one thing that bothers me is that on the title card, the part that says "The Legend of" doesn't quite match the part that says "Xanadu II." There's a bit of an art style clash. I think it's because of one having a black outline and the other not having one. That's just a minor nitpick, though.
You are, of course, entirely right ... ... ... but.
To misquote Ralph Waldo Emerson ... "Consistency is the hobgoblin of small minds".
The correct quote is actually closer to the truth here ... “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines."
In this case, we've got a problem that's in the "foolish consistency" category, and is actually caused by the limits of the logo's implementation in the game (i.e. you're right, but there's a good reason it's that way).
We've only got 7 colors (+ transparency) to draw the entire logo.
We're already using the 1 free color that we had in order to anti-alias the outside of "Xanadu" so that it looks nice.
The text that says "The Legend Of" is only 1 pixel wide.
That means that it
needs to either have a drop-shadow, or an outline, in order to stop it from merging into the background too much and becoming difficult to read.
A drop-shadow on that text would look very strange when the main "Xanadu" doesn't have one ... and even then, there would still be spots like the overlap between the "T" and the "X" that would still look strange.
Another alternative would be to drop the anti-aliasing on the "Xanadu" and use a drop-shadow on both lines of text.
It's certainly an option, but to me, the anti-aliasing on the edge of the Xanadu does such a lovely job of smoothing out the stair-stepping of the edges of the "X" that I'd really hate to lose it.
By using an outline on "The Legend Of", together with the anti-aliasing on the "Xanadu", we've placed both lines of text on the background layer of the image, rather than raising either of them above it.
Now, none of this was actually discussed when Phase drew the logo ... but I think that he was right, and I can use the argument above to explain/justify his choices.
I could be entirely full-of-shit, but I still think that given the limitations that we've got, there's nothing about "The Legend Of" having an outline that offends me ... and I'm a
very picky so-and-so.
<EDIT>
Arjak: After a night's sleep I realized that it's possible to see the "small minds" part of the Emerson's quote as an insult aimed at you ... please know that it wasn't meant that way.
The quote is there to give me an opportunity to comment upon when it's OK to throw "consistency" out of the window.