I generally call Tales games Action RPGs, so I agree with Mirage's definition. I'd never really thought of it that was before, but the hitbox thing is a really good way of separating the two. Perhaps another way of saying it is that Action RPGs rely on reflexes and 'twitch' skill whereas other RPGs only really require tactics. That definition would allow things like Diablo to also be classed an an ARPG as rapid clicking is required for positioning, dodging etc, much like in a Tales or Star Ocean game.

FFVII, on the other hand, is all "select a command from a menu". Reflexes don't matter at all.

For the record though I will say this: game genres are sketchy at best, and 'RPG' is probably one of the worst and most vague of the lot. I tend to just lump them in as 'RPG' and then describe particular themes and mechanics, rather than trying to place it in a sub-genre. You'll lose years of your life trying to figure out, for instance, why so many people put Final Fantasy and Valkyria Chronicles in the same genre.