Ever since they showed the combat for FFR7, I loved the idea of it. I prefer ARPGs over turn-based combat (although I love games like Dragon Quest), and they somehow manage to balance both styles to make everyone happy.
The combat is super fun, however there are two things that suck really bad:
1) AI party members are dumb as hell. I know that the combat system encourages you to switch characters constantly and micro manage things manually, but sometimes you just need to focus on something with one character. AI characters should be able to do something useful. There should be a menu about what you want characters to do when they are not being controlled, like heal, attack, defend, etc. That's something very common in games with AI characters.
2) This is the biggest flaw in my opinion:
Since the combat is materia based, and you choose which materia to equip, it becomes a game of trial an error, which gets annoying very fast. For example: You start a fight and realize that enemy's weakness is ICE, and you go "oh shit, I don't have ICE matiera equipped. So you have to either try to beat the enemy without it and take ages, or just quit the fight, equip the right materia, and start over.
This completely sucks! It's annoying as hell! In combat simulator for example, they don't tell you which enemies you are fighting when doing it the first time, so you have to constantly start over because there is no way you can't carry every single materia to win every fight!
To use Dragon Quest XI as an example: You unlock abilities to use in combat as you progress an level up, but those abilities are always there to use, so no matter what type of enemy, you can beat it. Then you have pep powers that depend on which characters are active in combat. However, if you need one particular Pep power, you can switch characters to be able to use it. It doesn't lose any strategy by having everything at your disposal.
In Final Fantasy VII, if you don't equip something, you are screwed. There is no way to equip anything mid-fight, and there is no way to win with what you have (specially with bosses) if what you have is the wrong choice of materia.