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We don't have to start from scratch; we changed the movement system and gave the enemy better movement code so the combat feels better. The turn based version will also be getting these improvements added (so no more enemies running through walls plus some other stuff)

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For some reason I had it in my head that you were going to make it similar to old school Zelda. So what you're going for is how you enter encounter's staying the same, it'll just be action based when you enter the battle.

Here's a thought- how about making it a bit similar to a fighting game? Blocking, parrying and whatnot. Think Soul Caliber.

Guess it depends on how far you want to go,

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Your first thought was correct - it's old school Zelda top down style in the same overworld. Sorry I didn't make that clear