oh, it seems there's a bit more to it than i thought...
from http://www.suikosource.com/games/gs2/secrets/
ave Nanami, "best" ending In order to save Nanami and see the "best" ending, you must first gather the 108 Stars of Destiny before choosing to invade Rockaxe. You will know you have accomplished this task if Leknaat appears during the rally and unlocks the fourth level spell of the Bright Shield, Forgiver Sign. Then Nanami must have a total DEF value of 121 or greater (you can use equipment to boost her DEF) when she and Riou reach Gorudo during the siege of Matilda Castle. Then you must select either dialogue option when she is deflecting the arrows; there is a time limit for this dialogue selection. Afterwards, Huan should have a private word with Shu after he claims to have failed to save Nanami. Please note that Nanami will still be unavailable for the rest of the game. With that being said, in order to see Nanami alive you must get the "best" ending, which consists of not entering the meeting room in your castle but instead going to Tenzan Pass to meet Jowy at the place the friends swore to wait for each other if separated. Do not defeat Jowy in the duels he forces upon Riou, and when he tries to give you his true rune, keep rejecting it. Eventually, the end sequence will start Thanks to Ced The Lad at the Suikosource forums for finding the critical DEF value for Nanami
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from http://www.suikosource.com/games/gs2/secrets/
ave Nanami, "best" ending
In order to save Nanami and see the "best" ending, you must first gather the 108 Stars of Destiny before choosing to invade Rockaxe. You will know you have accomplished this task if Leknaat appears during the rally and unlocks the fourth level spell of the Bright Shield, Forgiver Sign. Then Nanami must have a total DEF value of 121 or greater (you can use equipment to boost her DEF) when she and Riou reach Gorudo during the siege of Matilda Castle. Then you must select either dialogue option when she is deflecting the arrows; there is a time limit for this dialogue selection. Afterwards, Huan should have a private word with Shu after he claims to have failed to save Nanami. Please note that Nanami will still be unavailable for the rest of the game.
With that being said, in order to see Nanami alive you must get the "best" ending, which consists of not entering the meeting room in your castle but instead going to Tenzan Pass to meet Jowy at the place the friends swore to wait for each other if separated. Do not defeat Jowy in the duels he forces upon Riou, and when he tries to give you his true rune, keep rejecting it. Eventually, the end sequence will start
Thanks to Ced The Lad at the Suikosource forums for finding the critical DEF value for Nanami