@Luke
1. We could do it isometrically if you think that will be easier.
2. We haven't really talked about controls yet, I'm assuming keyboard would be easier, but maybe use the mouse for spell casting and archery.
3. Great, AI is probably our weakest area. Ideally I would like all three heroes to be on screen at once, one user controlled and the other two AI, if you can do that. The player should be able to switch characters at will.
Another ideal would be to have NPC citizens around the town, the enemy would also attack them.
How good are you with AI, because I was sort of dreaming about building an army around these 3 heroes for a final battle, not exactly Lord of The Rings scale but in the 10's at least. Is this feasible?
4. I was wanting to make the towns like final fantasy VII, where you can walk around and go into shops. There would be a smithy (weapons and armour), fletcher (bows and arrows), stable (horses), a "wizardy things" shop, and an inn (rest and food). We also toyed with the idea of having an arena where you can compete to earn money and prizes.
When a town is occupied by the enemy, there will be a number of enemies running around the town, you have to kill them all to free the town.
The main features I would like to keep are: Customizability of the main characters (clothing, weapons and skills), Mounted riding (horses), multiple towns for open exploration.
What I meant by multiple paths is that there would be more than one way of getting to the enemy castle, depending on which towns you travel through. There may also be obstacles that only one character can solve, i.e. a high platform that only the agile elf can reach. I'm not sure how well our characters work together; the elf and mage do pretty much the same, and the knight doesn't really do anything special

What unique abilities do they have?
Your signature has been erased by a mod because it was rubbish.
