Depends on the game, and how much I like the default outfits. Too much customization and the characters feel less like characters and more like avatars. This might work for games that are aiming for that (Dragon Quest IX, etc.), but for story driven games I generally prefer a few full costumes over a million armor customization options.
Tales of handles this well in general I find. The costumes, default and alternate, work for the characters, and accessories give some added flair in some titles. I liked having Jude equip a Milla doll and Milla a Jude doll...hehe...
Yeah this is pretty much how I feel most of the time, but i think it comes down to the game you're playing... for example, if it's a WRPG, most of the time you're playing as yourself, an avatar you create for the story, that's all well and good, I'm fine with any sort of customisation for that.
But when it comes to JRPGs, where more often than not you're playing the role of an already established character in the story, who already has their own design ready, this is when I'm not a fan of new equipment changing their appearance, especially if it means wearing a set of mis-matched armour types to get the best stats or something... if they MUST have visual equipment, then at least keep it in line with the designs of the characters so it doesn't ruin their appearance. I'm fine with weapons, just not armour, lol.
Since you've played Xenoblade Chronicles, hopefully you'll know what I mean when I say that sometimes the customisation can kill the mood of cutscenes and stuff, lol.