I remember reading that and people were saying attack plus was useless due to it, but I don't know if that's actually right since it seems like it would be a pretty obvious bug. It should be pretty clear if you just watch the numbers, especially if you have a character fight alone. I don't remember noticing my damage in the thousands being restricted like that.
I am going back to this but I found the source where I read the following (taken from Zerokid's arts guide in Gamefaqs):
If you check out your stats screen, one of your major stats that you'll often be
paying attention to is your character's Auto-Attack Damage. You'll get a range
of values such as 250-375.
However, Xenoblade Chronicles has a glitch whereby the upper damage limit is
capped at the lower damage limit plus 99. For example, if the game tells you
that you're doing 250-375 damage, you'll actually be doing 250-349.
Note that this does NOT work in reverse--if it says you're doing 300-380 damage,
that's the truth. You are NOT doing 300-399 damage.
Status effects and Arts will multiply this capped limit. Say you are using an
Art that does 3x the damage of a regular attack, and your auto-attack damage is
250-375. First you knock this range down to 250-349, then multiply by 3 for your
damage range of 750-1047. Just out of interest, if the game wasn't glitched,
that Art would deal 750-1125 damage.