1) The story is easily the best part of Xenogears. You must pay attention because some things can be a bit confusing. Some scenes don't even make sense till the later parts of the game. It deals with stuff from Judeo-Christian mythos, the Kabbalah, psychology, existentialism etc.
2) The combat is turn based. You use AP to pull off weak, medium and strong attacks. Save enough AP and you can use Deathblow attacks. It's not a very hard game and the only times you'd probably grind is to unlock more Deathblows.
3) Yes, the game has sidequests. A decent number of them, in fact. Be sure to check them out if you wanna learn more about the plot and characters.
4) And yes, the game has a world map to explore.
After you finish playing the game, search online for a translated copy of the Xenogears Perfect Works.
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