From what I have been reading, ESO's combat system is going to be using a "soft target lock" and a "hard target lock" mechanic. Supposedly the big change from this combat system being any different from any other single target game ( Rift, WoW ) is the use of stamina. I do think that is an interesting mechanic to bring into the game, but I feel like there needs to be more. Single targeting games ( in my opinion) will eventually fade away and be replaced by a more live action combat system.

Imagine, you swing your great sword at your target that has mobs around it. Your target is the center mob. Your great swords graphic swings through all the mobs but only damages the mob that is the target. We have all seen that before right? Now Imagine with the same scenario the whole target mechanic is removed. When you swing your great sword at the center mob, all of the mobs that make contact with the weapons graphics take damage. This same mechanic works the same way for the mobs of course.
Personally to me, using a targeting system for a brand new MMO will disappoint me, and I hope the developers will take that into consideration.

About the visuals I have seen so far in magazines and on websites. I do understand there are huge amounts of polishing to be done, but I wont be surprised if it turns out to be a disappointment. The visuals I have seen remind me of the graphics I saw on Oblivion with a PS3 console. Once the visuals are polished up, I imagine it will be comparable to what Rift has developed. Skyrim on a PS3 console looks better than Rift. And of course, that is all in my opinion.

Here are examples of the live action combat games and some amazing visuals ( Ignore the Anime style and pay attention to the mechanics):

Blade and Soul
youtube. /watch?v=ttggY4zLN_Y
com
Tera Online
youtube. /watch?v=yMy5Psd8Ip4
com
Here are Rifts graphics:
youtube. /watch?v=9uCsZDace6o
com
I know Tera Online and Blade and Soul are both Asian games, but I got to admit there is a lot American developers can learn from these games. Imagine mechanics and visuals from those games put into American MMO games. Imagine those capabilities in a Elder Scrolls setting. Huge potential.

Hrrrm, we're not fully informed about the targeting system in the Elder Scrolls Online, but a potential way they could stop the greatsword dilemma you pointed out is; have the center mob as your main target, but if the greatsword hits the enemies near you, make some of the target of your center mob attach to the others you just hit. Perhaps the mob you're hitting the most is your center target? Who knows, I certainly don't.
It will be interesting to see how they change the animations and such, but there's plenty of time to change it all.
My personal opinion, the character models look a bit stiff at the moment, but I'm sure they'll smooth it out.

From what we know its all based on a soft locking system and aiming your reticule.

You can select a target as your primary target but you still have to aim your reticule at your target to hit it. The soft locking is pretty much there to account for lag and to pick a single target out of a group of several. But bottom line is you'll still need to be aiming at your intended target to hit it. Think of it more as a highlighting system rather than an outright targeting system.

Heres a good article that talks about it, of note is the Dev quote in the article.: http://tamrielfoundry.com/2012/12/targeting-in-eso/

Well this is the closest thing to real time combat I've seen in an MMO (I haven't played them all, so excuse me if I'm missing one.)

You use your retiule to aim, rather than just clicking or tabbing to target. You need the reticule to hit. The target-lock function is just to help you track an enemy in a crowded battle.

And there is no reason to think the great sword phenomenon you mentioned will be present. In fact, I highly HIGHLY doubt it will be. In most MMO's weapons have reach. In Guild Wars 2, if you swung your sword at one mob in a crowd, all of the mobs your weapon touched would take damage (not just the one you targeted.)

Edit:

Just so we're all on the same page, here's the info we have about the targeting system.

http://tamrielfoundry.com/2012/12/misconceptions-regarding-eso/

http://tamrielfoundry.com/2012/12/targeting-in-eso/