Well, I don't think they're bad developers, it's just the conception of a Western RPG is built around perfecting that PC-line of D&D emulations.
But my biggest problem with Bethesda and Bioware is that these people just don't understand anything about animations. Their character models look like they're standing still, even when they're moving. Their faces look so empty and devoid of life, when games like MGS4 and even FFX almost 9 years ago have such incredible facial expressions.
To stay FF, they should bring their own battle system up to date in their own way, instead of stealing Bioware's like they did in FFXII. For example, you could have characters change positions in battle to the sides and back of the enemy, instead of just front and back lines. This would make back-attacks, pre-emptive strikes, and pincer attacks a constantly emerging aspect of battles instead of isolated incidents to stir things up a bit.
And there's no reason why they can't have towns. This just shows to me that their team "doesn't get it". Like Kitase said in a recent interview that they couldn't remake FFVII on PS3 because it has so many towns, and towns are something they couldn't figure out in this one. It's like damn - they need new programmers like woah.
So I guess they should start with the technology. They need to get that department at a level where they don't have to compromise their game design around their own faults. Kojima talked in his GDC Keynote about how his games actually come out better because of technology limitations, but I don't think that's the case with Square.