I would lightly push back on the idea that xenoblade is especially conservative, at least in regards to queer stuff. Yes, straight relationships are the focus of basically all the games, but I think you could genuinely make the case that it's most trans/adjacent major-ish rpg series outside of... maybe granblue? Roc is non-binary, Juniper is non-binary, Alvis is complicated (same), Nia is super trans coded... And that's without getting into headcanons based on vibes/character designs.
Final fantasy has some good stuff in it. I love Fang and Vanille. The honey bee inn section in FFVII Remake is great. There's a lot of great gendery character designs in the series overall. But Quina from final fantasy IX only goes so far if you're looking for canonical trans characters. And that's not a knock against final fantasy necessarily - I'm just saying I think Final Fantasy has been ahead of the game for years, and yet still has a lot of room to improve. Xenoblade compares well in this regard, even if Xenoblade also has room to improve.
Also, yes the straight stuff in xenoblade can be very straight, but it has its subversive elements. I said earlier that the straight stuff in xenoblade 3 can be gay - I stand by this. Stuff that's truly heteronormative normally focuses on Marriage, the Nuclear Family, reducing women down to just love interests. There are shades of this in Xenoblade for sure, especially in parts of xenoblade 2 (I'm thinking of the cooking stuff here which is straight out of something like Persona 4). But xenoblade in this regard is normally mainly about companionship, and finding yourself in another person, or indeed other people, and what you would do for those people. Not love for love's sake, but for the value of having someone in your life, no matter who it is. Maybe that's just called good writing, but Noah and Mio is a relationship I can get invested in as a queer person, in a way that I can't with 99% of other straight romances. I dunno! That's kind of gay to me.