The latter, surely. Pausing while on the character build screen is pretty nearly universal in Bio games, and you usually pause on inventory access too. Unless the design goal is to make you handle ambushes without optimized abilities, in which case they might want switching abilities in combat to be suicidal.
I'm pretty sure Sylvius isn't talking about when you're in a menu, but rather when the fight STARTS.
If your hotbar is not full, will the game push you into a fight without letting you modify it as the encounter begins? If so, then it's a huge problem.
I'm reminded of In Exile's comments about BG and the trial-and-error combat of that series. This sounds like the same thing, and it sounds terrible (at least, as far as I understand, that sort of had an in-universe explanation--you need scrolls or something. This version is completely unfounded).