Setting: Definitely something mystical, medieval. I much prefer magic over science-fiction.
Party system: Uhh, doesn't matter. Though abilities like "High Jump", "Glide" etc, should be shared.
Combat mechanics: Real-time action. Magic and melee.
Conversation: I like conversation, but it should be well-written, humorous at the right times, and interesting to listen to.
Art: Doesn't matter. Oblivion or Kingdom Hearts, I like both's art style. I do want other races than humans though.
Villain: I don't know, some evil guy. With original and interesting motives, though, and a memorable one.
Character development: Uhh, make the characters become more widely-known and epic throughout the game. If you're intent on turning a main character evil, then do it at the start of the game.
Cutscenes: Plenty, but not very long. Also, nicely done and interesting, so they wouldn't bore you. Some show-off wouldn't be bad too.
And the most important, the Hero: I usually like when there's a character that is pre-made. They are usually more memorable and far better designed than what I'd do in the customization options.