It's not a pure JRPG at all, which has actually given it some negative blowback from the "hardcore" in Japan.  It's really a dungeon crawl, but completely realtime and squad based with a heavy emphasis on tactics.  Think PSO meets Gears of War, only designed for 1 player.

It's not RTS-like at all, the combat is actually pretty basic, you can even turn combat on "auto" which means you just have to run towards enemies and your character hits them automatically.

Also, the huge town is basically the world map. It's not mission based like VC, TLS actually has exploration elements and wandering around places.

You make it sound like the other 2 games don't have missions or cut scenes =P. The big difference you are looking for is in the production value, where VC is more crude than the other 2 tbh. VC is a good game where they could have done more, VC2 is meh, VC3 don't know yet, but the VC series share the lower production value aspect of most current gen JRPGs, so the final product didn't come out as appealing to me as the other 2, but it's better than FF13 where the production value was high yet was nowhere as pleasent as it's predecessors. There is no world map in TLS btw, and shops would be like upgrading or getting special weapons in VC, the talking to people part got simplified by the low production value in VC where you just go through menus instead of looking around. As a whole package, VC's not as good, but that's really not a big deal since Xeno and TLS are both good ass games and VC is not far behind.

I like the boss strategies though, by giving you different party members for different missions make boss fights a lot more interesting for the most part, the concept of magic circles and elza's wind magic is really pretty brilliant.

It's not RTS-like in terms of resource or unit management, no... that was probably a poor choice of words on my part.  Tactical Action RPG would probably be more accurate, maybe more like Bladestorm or the KUF titles in some ways, only on the micro rather than macro.  There's elements of Monster Hunter or PSO in there too, especially the structure and emphasis on team co-op (even though it's 1p).

There also looks to be more to combat that simply hitting the attack button (or perhaps setting it to auto).  There's a heavy emphasis on drawing enemy focus (so your casters can get spells off, for example), there's a cover system, stealth elements, environmental factors... I mean it's not rocket science but "basic" compared to what?  Not the vast majority of JRPGs (Xenoblade included).  There's a heavy amount of strategy in play compared to the rest of the genre.

And yes, the game is mission based.  You still have one (gigantic) city to run around in and explore, shop, accept quests and push the narrative, but the game structure is still mission by mission, with zero overworld traversal (you go direct to your chosen mission when you leave Ruli).  Having town(s) to explore doesn't mean it's not mission based though, the Shining Force games had that and they're very much still old school mission based simulation RPGs.

We agree with eachother about TLS being mission based, but it's definitely not like VC. IN VC you go from mission to mission, in TLS you have the town in between which makes the feel of the game entirely different. VC is like Zelda dungeons chosen from a menu instead of having a hub world where you can choose where to go. TLS also has a mostly linear structure of quests but at least you can dictate your own tempo and there are sidequests as well I believe.

The problem was that they scored it higher than FF13, Star Ocean LH, Last Remnant, and White Knight Chronicles, which are all much better games.

really? u seem 2 be the only one who thinks FF13 & White Knight Chronicles are much better.
I can't tell whether or not you're being sarcastic.