I'm not really fond about the abandonment of the game's turn-based system, because if the Pokemon series, Yokai-Watch series, and Bravely Default series is to go by, that gameplay still isn't dead yet.
It was never dead, it was just horribly utilized. Well, "horribly"'s a bit harsh, but it never really had the gamer's fun in mind. Pokemon gets away with this partially because of the brand, but also because it's one of those series where, more often than not, you have a choice when to battle and when not to. There honestly isn't much else that you can do in the game other than that, but they provide ways to avoid having to battle (ie dodging trainers, avoiding grass, repels, etc.)
Youkai Watch isn't turn-based, really. It's about as turn-based as Xenoblade or Secret of Mana. Bravely Default uses a class system that basically gives the player a reason to want to battle and, similarly, it allows you to control the random encounter rate (which is something every random encounter RPG should do- it's a fantastic idea that's very pro-consumer).
Looking at Undertale, though; that's a game that really understands what it means to create a system that puts fun before anything else. The creator, Toby Fox, mentioned that he'd actually designed the battle system first because he'd basically experienced genre fatigue with traditional Turn-Based RPGs. As a result, he made the skeleton for a very engaging Turn-Based experience even if we disregard the ACT and Bullet-Hell aspects. First, he made it so that encounters would be dynamic based on which monsters did and didn't appear in battle. Second, he made it so that, if Encounters seemed to repeat, he'd just create more enemies so that they repeated less. This made it so that the player would constantly be interested to new things and would rarely just be going through the movements of using that one tried and true method over and over again to get through mobs of encounters between locations. Say what you will about Undertale, but Toby Fox definitely gets my respect for his understanding of the gamer and game design.
And that's really it, isn't it? People are likely to pick up your game if it's not the same as all the others, and just because you've got this story and concept that you want to create into the game doesn't mean you should slap the blandest possible battle system on top and ship it out. You can, of course, but that's some really disproportionate design you have there. Games like Bravely Default, Undertale, Resonance of Fate, any Mario RPG, and hell, even Pokemon and Final Fantasy VII understand this, and they as games are just made better for it.
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As for the whole episodic FFVII thing, I wasn't particularly happy to hear this, and as you said, many others weren't either. This is a risky move, as FFVII's remake has always been an ace in the hole for Squenix. Merely by changing it to an ARPG they've created some division between fans. This episodic business, especially so soon after the gameplay footage was released, is not only divisive (probably more so), but it also creates doubt. Doubt about pricing. Doubt about why data-size would require them to release in parts. Doubt regarding quality. Doubt regarding what will be changed/added. All of which, at this point, I'd say are understandable to question. This is an odd move, and I'm starting to think that Squenix's confidence behind this ace might be its undoing.
