It seems like most people have pointed out most of the issues I would have, so I'll leave those alone. In particular, Ferphylss and Berder pretty much said most of what I was going to say about the system itself, so I'll let those posts speak for themselves and myself.
That said, there are also issues with other aspects of the game. I have several points in particular: story, graphics, items, interface, and speed.
The story was alright, but I felt like there could have been a lot more done with it. There were a lot of characters, but it was mostly just going to a location, listening to a tiny bit of dialogue, and then running off to the next area. I never really felt invested in any of the characters, and there just wasn't enough choices for me to really feel like this was a proper RPG. I would suggest adding a lot more options for character development and story develop in your next game. This one had wonderful potential; it just wasn't taken far enough.
As for graphics, I liked them for the most part. It was a nice style and I was entertained. That said, hiding chests behind objects somewhat infuriated me. In particular, the hint that said "check behind everything" made me think chests that I couldn't see must be hiding everywhere, and so I kept looking, but never found any. All of the chests I found I could see; most of the time I could see them perfectly. It was only in the last area that I really started seeing "hidden" chests. If you're going to go for the hiding the chests, I suggest leaving something visible, or pulling a "moving foreground" trick so that the chests are always visible from SOMEWHERE, even if not from all angles (Memohuntress is really the game that put that idea in my head, and it did it very well).
Next, items. Now, I liked the way the items were streamlined, but they were not balanced. For one thing, the elemental system was not used to any extent, and was mostly useless. The only one I found myself exploiting was Cinnacat's bamboo stick, because it let him actually kill one type of enemy one hit. Also, the only potion really worth buying was the one which restored 50 Mana, since Cinnacat was a better healer than any other potion.
But, what really got me with the items was how they were distributed. I got a hell of a lot of different items for use for different characters, but they were way out of whack. There was far more armor than hats or weapons (or shields for Fjor), and it was a little odd about which characters could equip what. That, however, was not really my issue. My issue was simply the huge number of items with not much difference. I found myself equiping items on one screen just to pick up more on the next. I'm all for lots of items, but that seemed a little bit much, even for me.
Fourth, interface. In particular, for being a flash game, being forced to use the mouse was a pain in the ass. I play on a laptop, and the mousepad is annoying. Being able to just select things with the arrow keys would have been such a step up in this game. Second, there were a few little things that ended up being annoying. The fact that I had to click on an equipment area just to see what equipment was available (I went through the first few stages not equiping things, 'cause I didn't see them), odd wording in some places (such as the Sunshine skill asking to select one person in the menu, but healing everyone), and sometimes frustrating (such as having to attack if I accidentally picked attack). It was just little things, but they added up.
And, finally, speed. More than anything else, this game felt too slow. The fighting did not go quick enough, in particular, and that made the game feel very long, and not in a good way. Additionally, the diminishing returns of the stats was somewhat off-putting when I got to higher levels and everything was suddenly one for one. Making it run faster would be one of the single best things you could do.
Now, in closing, I liked the game. There were some problems, but I played it through. And I enjoyed it. So, please, keep making games.