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1) Loss of connection with the character(s).
This is the most serious problem, but I think that it can be replaced in some part with other forms of connection outside of this system; see number 2.
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2) A number of players like to micro manage their character(s).
Yeah, that's true. Micromanagement would be available to them if they really wanted it; states are intended to save time, but if a player is good at flipping through commands, then more power to them.
But in my experience, micromanagement seldom amounts to the execution of a complicated tactic; it's usually the simple ones that demand the attention becomes of interface problems. The states system is intended to deal with the simple ones, and make the complicated ones easier to do by getting rid of the obvious actions.
While the act of directly ordering a particular character to engage in an action does create a link between that character and the player, I doubt that the player will be able to maintain a strong bond with someone they have to lead around by the leash all the time.
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3) States would require more memorization than regular moves since they behave differently than what most players are used to.
This can be solved with a good introduction to the system, a well-presented tutorial, intuitive UI, etc. Fundamentally, this should require less memorization than typical systems, with additional options for powergamers who wish to refine their tactics; though your point about the usual RPG player's familiarity with typical systems is well taken.
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If your Paladin is in a mode that focusses on keeing your team out of harm's way and dealing damage when the opportunity arises, your ninja is set to go balls-out until he's pretty beat up, then report to the Paladin for healing, and your mage is set to keep out of harm's way and fire a lightning bolt when he gets enough charge, you could just let them go or most fights. That will streamline a lot of random battles and "grind" efforts. Set your team up so the thief gets maximum game time if you want to buff him, or balance them out for optimal anti-dragon performance. Shifting gears as the enemy changes or as your system fails would be very engaging. I think you should explore this possibility further.
Yeah! This is the sort of thing I had in mind.
With the additional thought that these states would be manipulatable by both sides; perhaps with something like a morale system.