These two targeting buttons play a rather large role in targeting system.

Now, for some reason, "Target Nearest NPC" seems to include EVERYTHING that isn't a PC. Although, in the most literal sense, that is definition of a "Non-playable Character". However, it serves no purpose to have such a button that includes enemy monsters, NPCs such as Sisipu, ??? and Dusty Tomes.

There should be a clear distinction between these two buttons.

"Target Nearest NPC" should be restricted to only friendly NPCs, such as the characters that appear in green text.

Let me give you the most recent battle situation we can apply it to; The Firefall Faire Event
Bombard is running around, you want to target only him. However, there are a pile of other enemy monsters around him. The enemy monsters are standing between you and the Bombard. Clicking the button "Target Nearest Enemy" would target the enemy monsters. Clicking the button "Target Nearest NPC" would STILL target the enemy monsters, since they are standing between you and the Bombard.