I decided to follow up on this after all, and leave it to the fanatic Japanese DQ fanbase, Dragon Fantasy is actually an elaborate name given to the many, many FF meets DQ rom hacks out there in Japan.
Here is a Japanese LP of one where it follows the graphical, and storyline format of DQIII, yet uses various Final Fantasy, Seiken Densetsu and Chrono Trigger soundfonts from what I watched so far. Also, the world map is completely rearranged, and the battle system is Dragon Quest VI's. The most interesting thing about this version, however, is the implementation of FF classes, so if you want a Moogle, an Onion Knight (trivia: Hassan's favourite class aesthetically-wise) and a Lancer to be in your DQIII roster, you're more than welcome to!
EDIT:
This seems to be a detailed website (or screenshot LP?) about the game portrayed in the video, DQ monsters can also join your party as well as traditional DQ classes.
There also appears to be a sequel to the original Dragon Fantasy I probably saw, which has a blog entry
here, and instead of using only DQIV characters, they expanded the game to include FFIX characters.
Finally, so far my research has lead me to question if they are even ROM hacks in the form of .ips folders at all, and are in fact a manually made .exe folders, which would be even more exciting for me, being the nerd I am. I'll continue looking around when I am not swamped in doing research for my essays and whatnot.