Here's how I found it works best for me. I changed the control scheme to whatever option makes left and right strafe. I found that looking forward helps, in that with the default setting, it locks onto stuff that's in front of him, but might not be what you're looking at. I made it where I control whether or not my sword is sheathed, because there are two different set of options, and I'd be in the middle of trying to target something, and my dude would put his sword away and everything go retarded. So now he makes sure to keep his sword out until I tell him to. I changed the filters so that when the sword is out, he only targets enemies. But basically I just try to do it manually. If there are say 3 enemies, I'll lock on the first one, kill it, then hit O to unlock off everything, turn to the next one, hit x once then start into combos, repeat. It works, I think the real problem I was having in FATES was just that there were so many people. It's still almost impossible to figure out what going on.
I think there should be a few more options to customize the UI. At the bottom, whenever you're holding the R2 or L2, it brings up a set of names in blue boxes for each skill. I want that damn thing outta there. It's in the way, and who doesn't already know what your skill names are. Not to mention it's the same color as most of the player names, so it just adds to the blur in a FATE.
I took a lot of the player health bars away, and enemies unless I'm targeting them, and I did away with the targeting reticule, the agro lines, and whatever other lines there were, tying to clean it up as much as I could. You don't really need the target circle with that giant target icon that comes up above their head.
I can't imagine trying to heal with that **** though, but I would think you might be able to press select and cycle up and down amongst your party, healing that way, as opposed to trying to cycle through them on the field. If it lets you, who knows.