There should be an option to have characters face diagonally because battle sprites tend to look better at these angles. I think it looks good even though the grid is orthogonal rather than isometric. This is how Live A Live handled it and I thought it was interesting. Personally I think diagonal strafing in all 4 directions looks a lot less awkward than making 90-degree turns and walking in straight lines like in FFT, and it would look pretty stylish in a game with more sprite animation than Live A Live.
http://zsnsk.sakura.ne.jp/livealive/battle_system.html#rear-or-side-atk