Ideally it could work like this:

You are solo, and want to fight a monster. You target it and hit your attack key. You pull out your weapon and start attacking.
When its dead the character automatically puts their weapon away.

For casters, when they cast a spell their weapon stays out a few seconds after. After a delay they automatically sheathe their weapon.

As long as a weapon is out you are in Active mode (as we do now). Once the weapon goes away you are back in passive.

Players would no longer near to remember to swap back and forth (there really is no reason we should have to in the first place!)

For parties we could get fancier too.
When you hit your auto attack key it could target the nearest enemy from the currently engaged group if you have nothing targeted. (Normally it might just select the nearest monster if none is targeted)

Ideally this will reduce the amount of fumbling between targeting the monster, making sure you are in active mode, hit the enter key and make sure you start auto attacking. Then re target the next monster from the enemy group, hit enter etc.

Would be a boom boom you're in, you're fighting, then you're done and moving on. Keep it fluid!