That being said, of course they could make it for a million bucks. It all depends on what they want to pay themselves. If they take small salaries (50k a year) and it's like 10 guys, that's 500k. Then some money for QA/distribution and you're done.
With 10 people and 1 year with nothing to do 40 hours a week but work on a indie rpg, I'm sure I could make one. A few designers, 1 writer, 1 director, a handful of programmers, 1 sound guy, 1 composer. Etc...graphically they should just grab an existing engine and work with it.
I honestly think you guys who are/have worked at the big million dollar production companies probably have a different view on the "cost" of making a small game, versus the indie guys making stuff like Super Meat Boy or Avadon or vvvvvvv or Sequence etc...from what I've read in interviews, most indie devs estimate the cost of their games from start to being on steam at around $200-400k total for a few person development team over a year or two. 1 million doesn't sound too far fetched for a top-down old school rpg with very little graphics.