Is the engine capable of a more engaging and exciting combat system? I'm not sure how coding works and hope that a major improvement can be made without a huge overhaul. While terraforming, gathering, and crafting seem to be things that will be very involved and fun, well... Combat needs a whole lot of help. (At least melee, since ranged isn't in for us to comment on, yet.)
The pace seems OK, I guess. It needs to be fast and exciting, but I wouldn't want to see a spazfest like Darkfall (with regard to melee sprinting).
DF does do a great job of fluid combat, though. I can't name one twitch-based MMO that has done it better even though DF could use more animation variations.
Xsyon combat animations are jerky and too "short". They need to be more extravagant. Nothing ridiculous; just bigger. That might help it feel more engaging and natural.
*Edit* - After looking at the swing with an axe, again... It looks OK. I have no idea what is up with combat other than it just isn't very good.