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According to IGN, the next Xenoblade will focus on story progression again which is a very good thing. Hiding away story between stupid mandatory fetch / kill quests is a huge design flaw in X. There is no freedom if you are not free to continue with the story any time.

All the side quest stuff can stay but it should be purely optional. The focus on story progression is what made the original Xenoblade perfect, despite its many sidequest related flaws. Also a focus on story does not mean that there are less things to do.