My problem with the battle system is that I always felt like I was fighting it because I couldn't depend on the a.i to do what I wanted. None of the battles are all that difficult and the only real issues that arise come from the fact I can't depend on the a.i. to heal when I want it to. This makes me play as the medic and just hope my partners aren't idiots. It's only been an issue for two fights so far since most battles can just be slept through. I'm sure the optional bosses are an exception and I know there are some optimum character setups that trash just about everything without the need to heal at all. For my first run through, I'm just playing it through my way.
That said I still prefer it to Infinite Undiscovery, FFXIII, FFXII, and all the other single character controlled rpgs of late. I'm not saying it's a huge problem I'm just saying it isn't a battle system that I've fallen in love with.
Xenoblade is still the best console rpg I've played this gen without a doubt. I'll probably end up liking the Last Story more though. I am worried about that battle system as well but I'm hoping the environmental stuff can actually fix the problems I have with these new hands off battle systems.