The last game I played that was something like this - although not nearly as good - was White Knight Chronicles. Xenoblade effectively plays like what WKC should have been. The somewhat mmo-ish battle system isn't a chore like that one - it's fast, frantic, and you have enough constantly recharging techniques to keep yourself busy. Your teammates are actually somewhat intelligent (shock!) and tend to do useful things in battle. There's also several different aspects to leveling up (well, in addition to levels) - you can power up your special moves, your Monad blade moves, build up passive(ish) skill trees, and develop combo moves with other characters. The "future sight" system that was slightly hyped up doesn't come into play too often (only against bosses as far as I can tell), but it's neat while it's in operation.
The storyline is developing pretty well and has had at least one major turn I didn't expect. The main cast is endearing but not too far from the normal JRPG standards - thankfully, there's no real emo to be found here. Lots of spunky youths fighting for justice though.

The only problem I have had is that changing your target in battle can be a little tougher than it should be. No real biggie though.
Other random notes: the music is excellent. The graphics are great for a Wii game. Lots of side quests (right off the bat even), although most are "kill X of monster Y" or "get me X items please." Game always tells you where next story event is and has a story reminder feature. You can teleport around to speed up traveling starting very early in the game. Supposedly the game is really long.
I don't know if this will get an English version or not but I sure hope so. It sold just over 100k in Japan, which I guess is good but not great. I'd like to see them get more recognition for it. If you have a Japanese Wii and are comfortable with playing an RPG in Japanese, this game is definitely worth your time.