You objectively cannot argue that FFXI was anything but a niche game.
Considering the era it was released, it was also wildly successful. Most niche MMOs didn't get anywhere near as much popularity as XI did. Which, in your own words:
All of that gets glossed over
It didn't hit millions upon millions of subs, but no MMO back then did besides Maple Story, which not only came out a year after XI, but at the time was THE most played MMORPG, ever. MS still technically beat out WoW despite how successful it was however it wasn't until WoW did MMOs slowly move out of the "niche" category. So realistically, MMORPGs in general was a niche genre, so it's kind of hard to be a niche MMO in a niche genre, unless it's something like comparing Smash Bros to other fighters of the time. Since you can't really argue that there was a certain group of players who played MMOs and a certain who played every other kind, very rarely did you find gamers who set MMOs into their gametime with every other game back then because as said, it was niche.
You had the odd person or two who played WoW full time then cracked out their GBA and DS, but it wasn't as common as it was today to play an MMO for 2 hours, crack out some Halo, then go back to your MMO. Once MMOs became far less structure is when it started becoming mainstream and honestly, when the design of MMOs started going downhill. MMOs simply weren't designed to be played "casually" back then which people love to forget that the whole reason they were niche to begin with is because it was the type of game you dedicated actual time to compared to playing 20 rounds of Halo or a Lan party at a sleep over.
This happens in every MMO, including XIV, so no one really "glosses over" that. It would be unheard of to see an MMO with no cheating. The thing with XI, however, is the progression and itemization were quite different from the norm at the time, so the cheating only really happened with ground kings, which only A FEW people in the grand scheme of things did. That's why, when speaking of glossing over things, you joined an HNMls which were indeed known for cheating, or you joined linkshells that did every other content where cheating rarely if at all ever was a problem.
the constant bickering and talking down to players who did not conform to the meta of the patch
Happens in every MMO, including "non-niche" MMOs of today. Even more so in vertical progression MMOs because there's literally nothing else you can do because there's only 1 progression that "matters." XIV for example, there's no excuse to not have at minimum full enhanced Eso gear or a set of Lore gear by now if you were a consistent player. That is when people "talk down" to others because not caring doesn't necessarily mean other people are "conforming"...that kinda just sounds like personal bitterness.
the RMT, the PKs, the massive miss behaviors
Every MMO. Just like no one forgets 2005 when IGE sold 1mil gil per 1$ and you would be lying through your teeth if you say no one bought gil back then or even halfway got tempted yourself because the economy of XI was FOREVER changed since that day. So it'd be hard to say someone would gloss over the "negatives" when at the same time you tend to have people get attacked/berated for only focusing on negatives or shortcomings of a particular game, so I don't think anyone ever has glossed over anything bad, especially when it comes to XI.
Time takes out the sting of these things and you begin to value the good times that aren't repeatable - that's nostalgia, and yes, it effects people's hindsight. It's right to call it out.
Which goes right back to when I stated, people tend to always state nostalgia makes you like something that supposedly wasn't good to begin with. Just like I can guarantee I can state I loved XI's soundtrack far more than XIV's and it'll be "because of nostalgia, the music wasn't really good because it was compressed and certain instruments were low quality. Now XIV's, THAT'S a masterpiece of a soundtrack!"
Further, it's the super serious tone that leads to things like probation periods where someone can spend weeks/months really getting nothing out of the arrangement only to potentially find they're better off elsewhere, or worse, get kicked, repeating the cycle elsewhere. I know token systems mitigate this to a degree, but as long as random drops are still a thing, priority lists will continue to exist and that just feeds into the exclusivity angle.
Let's put it this way, we all know from the XI days you were basically a huge supporter of a particular style of RDM, which clearly didn't fit well into most Raiding styles and content. If it were not for "probation periods", said new RDM who only used their RDM for solo content or meleeing ending up getting the drops that would help the raid..would just hinder progression. Not even saying that in a bad way, but what was stopping you from getting gear you could ONLY get if you joined an actual EGLS (since you couldn't solo Dynamis and Limbus/Einherjar back then) and bailing during your probation period if they allowed free lots?
Yeah priority lists existed but it's how you rewarded your players in a fair manner or else joe blow DRG who has a naked 75 RDM could walk out with a duelist chapeau compared to main RDM who needed it that walks out with nothing simply because DRG had 781 DKP, DL.Chap costs 45 DKP, 75 RDM only had 30 DKP, realistically it goes to DRG, yes? There's the reason for priority lists.
Except one's ability to compose a sentence, paragraph, or whatever the "employer" is specifically looking for doesn't translate to how well they can actually play. It's why you should just cut that step and actually play with someone to see if they both fit and seem sociable enough.
In all honesty though, while playing on the NA side for raiding I did notice that while it doesn't really translate to actual skill people that could actually form a proper sentence and properly fill out an application versus "lolz invite me pls i 1800 dps drg lore wep a7s on farm mode fam" seemed to always actually been the better players because they not only took the time to fill out the app, but they seem far more reasonable when you start talking to them than the person who feels their 1800 dps should speak for itself when you try them out and they still get outdps'd by the DRK. I know this from experience because I pull 1200-1400 DPS on my DRK and our WAR/PLD pulls 1300-1450 (WAR)/ 1100-1280 (PLD) dps as of now and the NA group I run with actually use me as a barrier of entry because if you can't outdps a tank you're honestly not playing your DPS job right. Not gloating but, it definitely says a lot if your tanks are lifting most of the dps burden.
The step isn't cut because it shows if someone is actually serious, much like you won't find ANY employer that will cut the resume step or interview step and go straight to hiring you because it's not so much what's on it (though helps) it's the effort. Sure you could get shoved it if someone you know works there or if the boss is your mother ala family business, but that's what the probation period is for, to see if you can walk the walk and not just talk the talk.