One thing you need to correct is making it so that you cannot begin quests without having at least 1 party member in the active battle party. When I first played this I forgot do this and I tried to initiate battles like 5 times before I understood what was even happening.
Also, one party member should always be required to be in the defending party.
You need a cursor that follows the currently highlighted item because it's hard to follow where that is sometimes when going between submenus. Think of the glowing orb that follows the highlighted item in Kingdom Hearts. Something like that to direct the player's eye to where they are.
A sound effect when moving the cursor would be nice too.