The odd thing is that you can use that filter setting with a keyboard that looks like it's only for controllers. My room mate and I were really confused why the section that shows 'LB+X', "RB +Y" etc can be used with a keyboard, however it only affects the cursor. You can change tab to that, so you will be 'cycling' with tab using those filters. IE one setting for 'all', I can tab through party members, npcs, monsters, everything. I can then select another filter(set to any key you wish) to now only target agroing enemies, not just all enemies. This will enable you to 'target' but that is only by default because you started attacking/healing it.

I completely disregarded the section that looks like it's for controllers only until I found this out. I have to switch between the two styles if I play my BRD or PLD tho. Hoping they streamline the targeting system, or alternatives.