I've been playing Xenoblade 2, Torna, and Chronicles DE over the past four years and happened to be almost done with DE by the time Xenoblade 3 was announced. I was also the reviewer of Xenoblade Chronicles 3.
IMO, Xeno 3 takes the cake. I feel the story is more interesting and emotional overall (in particular, an entire villains entire story arc which I won't spoil, but is sad and tragic), the characters really build on you and you begin to understand them better. The world is fantastically built. Though it isn't as interesting as simply being on a titan, if you've played Xeno 1 and 2 you'll understand why I think it's the best. The combat takes the best parts of both and mixes them together while adding even more flexibility. The gacha mechanic is gone, but unlocking new blade styles (the best part of Xeno 2s blade mechanic) isn't. The graphics are the best out of the series. And the QoL changes are numerous. Simple things like having on screen navigation, how easy it is to equip items best suited for your class, and even the tutorials are far more helpful.
I LOVED Xenoblade 2, but I knew it was a step down from Xeno 1. I can't say the same about Xeno 3. I can't think of a single thing that Xeno 1 does better aside from maybe the world of you don't have context from 1 and 2 before playing 3.
Regardless, IMO all of the games are top notch.