Seems plausible.
I'm of the opinion that the gameplay of Killer 7 actually resolves the main loose plot thread from Moonlight Syndrome.
What really happened to Mika Kishi?
http://www.killer7.3dactionplanet.gamespy.com/killthepast.htm
Ending Credits Final
http://www.youtube.com/watch?v=oDwVMvqpOg4
Ryo Kazan is seen running & walking across a valley.
He eventually runs into Mika Kishi. (She's supposed to be dead, but I'll get into that shortly.)
The two of them hug each other affectionately.
After the credits roll.
We are taken back into Ryo's room.
Rumi is shocked to see Ryo laying there lifeless.
Ryo is clutching on to a paper bag containing the severed head of his sister Kyoko Kazan.
Rumi looks at the tv screen & sees Mika Kishi trapped inside.
Moonlight Syndrome never actually tells you why Mika Kishi is stuck inside the tv.
(In fact the MS ending is the only time in the game that the tv ever gets focused on.) The only hints that we have to go on are
1. Mika was present during the ending credits. She hugs Ryo Kazan.
2. We later see Ryo lying around dead or unconscious sitting in front of a tv & still holding on to Kyoko's head contained inside a brown bag.
(The brown bags in Killer 7 are supposedly the heads of the Smith Syndicate.)
3. You can clearly see Mika Kishi tapped inside Ryo's tv.
This cliffhanger from Moonlight Syndrome finally gets answered 8 yrs. later (2005. Moonlight Syndrome was originally released in 1997.)
with the release of Killer 7.
Emir Parkreiner from Killer 7, who uses the tv as a medium in order to "channel" in the Smith syndicate is actually a conclusion to the ending of Moonlight Syndrome.
Finally, Killer 7 shows to you the final conclusion to Moonlight Syndrome
The meaning behind the tv & what actually happened to Mika Kishi.
-----
In Killer 7 we later find out that
The Smith Syndicate are all dead, & we actually transmigrate their souls into Emir through the use of the tv as a medium.
Through the course of the game mechanics of Killer 7. We are indirectly explained how Mika was able to hug Ryo during the credits.
She was actually a corporeal spirit, who may have been using Rumi's body as a host.
Just like how the Killer 7 utilize Emir's body as the main host in order to exist in the physical plane.
So in effect it's not that K7 is referencing Moonlight Syndrome.
Killer 7 is actually closing the final chapter in the Moonlight Syndrome game.
(The only remaining loose thread from Moonlight Syndrome is Yayoi Itsushima/Hanayama herself.)
I'm planning to upload detailed accounts about most of these questions at these two pages
http://www.killer7.3dactionplanet.gamespy.com/sousa.htm
http://www.killer7.3dactionplanet.gamespy.com/psycho.htm
I haven't gotten a chance to work on them yet, because I'm working on graphics for the Moonlight Syndrome page.


I still need somebody to upload content for No More Heroes.
http://www.killer7.3dactionplanet.gamespy.com/nmh/
makes me feel like I'm in a dream that is slowly turning into a true nightmare (with Greg Nightmare being the final 'boss'), not unlike a Lynch movie like Mulholland Drive, indeed.
Nah, MD is more similar to Fower, Sun, & Rain.
IN SC, the word Muholland is sometimes used to refer to FSR. I doubt that FSR has anything to do with Lynch's tv series/movie though.
(Considering that SC was made in 1999, and FSR came out 6 months before the movie.)
I think that both Suda & Lynch just happen to smoke the same shit, lol.
The one thing MD & K7 do have in common is the constant red herrings.
However what makes K7 differ immensely from FSR & MD, is that K7 pretty much begins as batshit insane, & ends as bat shit insane.
One of the reasons for that is the full moon before every level.


Here's the instructional video where I point out some of the common threads between these games.
http://www.youtube.com/watch?v=c3ba_sAneAM