First thing I should mention, is that this is actually going to be a clone of Earthbound. Even though that's a different game altogether, it still had its own (singular) auto-fight mode, and I think it would be interesting to spice that up more than a bit.
AI's will not know everything. They might learn stuff by experimenting, such as how powerful an enemy is or what its weakness is.
This being an EB clone, the battle engine will be turn-based.
Each character will definitely have a default auto-fight mode based on their personality (one of the modes I recall from Grandia II), such as defending their party and keeping their health up or attacking all-out.
Psionic Points should not be too hard to recover, but would still be limited enough that alternatives should be considered. In fact, I actually have an issue regarding that with Grandia II and III; the only items I tend to use happen to be MP-recovery items and revival potions, because I can use magic power both to attack and to keep my party's health up. Most of my recovery and attack items end up unused. (Described in general in the second half of this entry on LiveJournal
(and yes, that's my game's working title at the end).)
Positioning is relevant, in that your party will form one or two rows, depending on how big it is, and enemies can form up to three rows depending on their own numbers. Positions are not negotiable, but they do affect who gets hit in multi-target attacks such as PK Fire, PK Laser (hits enemies vertically, whereas Fire hits horizontally), and bombs (which strike in clusters spanning multiple rows).
Turn order would depend mostly on Speed stats, though other things might factor in as well. (The orders in which everyone acts in Earthbound seemed to vary between turns, even though Speed is supposed to be the primary factor involved.)
On that last thing, not for enemies, but yes, before each turn begins, I would have something appear to show what everyone is about to do (also in case the player entered a wrong command for the last manual one). The player will then be able to pick whichever characters they want to have do something else.
Anyway, yeah, I'll be sure to take all that into consideration.
(Also working on a document about the game mechanics in general. Bound to be more stuff to add even after I write everything I'm juggling currently, but I'll be glad to share a copy with anyone interested, or even post everything here, when I'm near finished.)