I've never turned FF on so I defer to your experience, but I have to say that that sounds pretty broken. Okay, POTA and other non-pure damage side-effects I'd let slide, but why would an AoE spell cause damage, but an AoE melee auto attack not? That's just silly. I mean, if you were standing right behind someone doing a 360 swing with a Claymore IRL, you'd get your head chopped off too. Or at least a really bad headache.
It is probably simply a gameplay thing. 2H is bad enough as it is early game, if auto attacks did FF as well it would be more frustrating than it needs to be really and probably everyone would just use mauls. I am a bit indifferent wrt daggers, since auto attacking isn't quite as important to them.
I went back to the FF thread and someone had already reported that masterwork effects never do FF, so that did jive with my experience with POTA on Sulevin and Immolate on bows / staffs. I don't know if I never read that part of the thread, or read it and forgot it. In any case, I had been avoiding CL masterworks, but I will need to give them a try.
In any case, probably some thought was put into FF, although the end result may still be a bit clumsy. I have been playing with it on now but there are always times when I consider dropping it. I am not entirely sure if the problem is mainly based on interface and targeting issues or simply choice of what does and does not cause FF. It is probably a bit of both. The stuff that I find annoying or inconsistent:
Mighty Blow - AOE FF power without actual AOE damage indicator. Probably should have recycled something like Cone of Cold's reticle and had clearly defined area of effect. I still haven't entirely figured out how it determines the radius.
Earthshaking Strike - besides this being a goofy attack that shouldn't exist, it seems like the main reason this doesn't do FF is just because it is weak compared to MB.
Terrifying Fury - Applies chance based fear to inquisitor and party via a passive. I have no idea why every fear proc does not apply to you or your team. Some do FF and some only affect enemies. I never saw it proc on friendlies with FF off, so it has to be something with that setting. May be a bug, but I respec'd out of TF.
Wall of Fire - Does not apply any FF effects, and it is surprising to me that they didn't feel it needed FF given the low cost.
Static Cage vs POTA - SC has no FF effect, but POTA does. They cost the same mana, have the same cooldown, and have a similar function.
Chain Lightning - Probably should have either not had FF, or should only strike in an AOE of your choosing.
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To bring it back to the point of the thread, I don't find pausing and issuing the commands quite as fluid in DAI as in DAO, so with FF on I am more likely to do something like simply go 1 melee, 3 ranged on nightmare and limit some of the FF powers in the builds. Warrior, Archer, 2 mages seems like a pretty decent team. Who those are specifically might depend on the situation.