The fix for keyboard players is that you can actually set closest NPC/ enemy to an actual key through the targeting tab. You can also select engaged enemy, etc as well. With that specific tab, it takes away all my complaints to the targeting system.
This still doesn't fix the game pad players though, and the limited button option will always be a problem as well. I'm sure you could easily make a macro to solve this, however.... Seeing as the commands are in the game.