@Spire: Alright. I can see that happening with the Zora's. It was manly Castle Town/The Deku Tree reactor that made me think of Final Fantasy. Though I definitely wouldn't mind if Zelda became an Action RPG, as opposed to a full on adventure game.
@Phantom: Resident Evil: Zelda Edition?
Well here's how the Deku Tree thing plays out in case it has come across the wrong way:
Deku Tree
Some scientists during the prosperous, industrial age of Hyrule realized that there was a TON of stored energy deep in the Deku Tree's roots, despite it being dead for centuries and centuries, so they designed a special type of reactor to be built within it to harness this power. It was considered relatively "eco-friendly" since it ran on solar power, and was only to draw this power out of a dead tree, not out of the rest of the forest, but it backfired, exploded, burnt a considerable amount of the tree and surrounding woods, and finally leaked incredibly potent radiation that would kill the forest. Eventually, a fungus immune to this radiation would move in and colonize, feasting on the decaying wood. Any life forms remaining would reflect this new ecosystem. The Deku would absolutely be no more, and a new type of fungal species would inhabit the region. At the time of this game, the radiation levels would have subsided enough so that the fungal forest could be explorable, sans perhaps the Deku Tree.
Phantom7
As for Phantom7's idea, exactly as I thought. Resident Evil: Zelda Edition. Can't say I'm fond of it though. Seems as if you were going for a dark feel, but down the wrong path. I think anything involving the Twilight Realm should now be over, as so many games have built up and/or hinted to it (ALttP, OoT, FS/FSA). Now that it's been seen, I think it should be left alone. It was a very signature element to Twilight Princess, even invading its title. Just as the Ocarina of Time should be left out of future games (except for perhaps a mention or an easter egg appearance), the Twilight Realm should no longer play a major role in the games. Reinvention is key, and your plot sounded an awful lot like what might have happened if Twilight Princess following OoT in Adult Link's timeline, you know, with the destroyed Hyrule Castle/Town, flooded by ReDead, etc.
Playing as Zelda in a Spin-off
Speaking of Zelda spin-offs though, I was playing Lost Kingdoms (GCN) yesterday and renamed the protagonist Katia as Zelda, so the first words actually spoken in the game were, "Princess Zelda!" Shifting my mindset to make this feel as if I were actually playing as Princess Zelda, I realized, "Nintendo needs to make a full-length LoZ spin-off where we play as Zelda, but in a completely different style of gameplay." Just as Lost Kingdoms is a real-time card battling RPG (except against monsters rather than other card wielders), Zelda could adopt a completely new mechanic, played entirely differently than the games featuring Link. It would not be a major title in the series, but it would definitely make them some money - especially if they made it as a follow-up to Zelda Wii, using the same graphics and what not. They would not have to invest in creating entirely new models, textures and what have you, as most could be renewed.