(1) Most game-play is not instanced. Story-line events that require NPCs to appear or disappear, including special mobs for special fights, are instanced. Honestly, you will spend most of your time outside of quests, and many quests do not require instancing.

(2) Yeah...there's not a chat channel system though. The devs are completely aware of the problems with chat and are trying to fix as much as they can with the current server. The server application has design flaws which make this difficult, which is why 2.0 has a completely different server app underneath.

Linkshells are like guilds or clans in FFXIV, for now. You can join up to 8 and talk to other members anywhere in the world, which is currently a good way of finding players to craft items for you or play group content with. However, you can only be signed into and talking on one at a time. I say 'for now', because the upcoming Free Company system will more closely resemble a typical guild or clan.

(3) Most importantly, the current team and its leadership acknowledges and identifies the original version's flaws and has demonstrated the ability to correct them. In addition, they have planned to go beyond correcting the flaws by introducing new types of content not possible under the current engine, like large-scale PvP or PvE.

Apart from that, the addition of quest and grind-ish content, the improvement of graphical and server-side lag, and the adjustment of current mechanics have all contributed to change the game from mostly tedious to quite fun. I honestly think active server population has doubled from 1.18 to 1.19a, which should give some weight to these claims.

As with many MMOs, the toughest and most exciting content is end-game, but if you want to evaluate FFXIV, spend just a week with it. You can most likely get a fighting class to L20, find players (if you're in Ul'dah) with whom to explore Shposhae, the low-level dungeon, and dabble in crafting and gathering. If you like the style of the game but can't get past technical or performance issues, wait for a while. 2.0 will be vastly different, and things will change significantly over the next year before 2.0 launches.

Hope that helps!