I was at the point in the game you have reached not too long ago, so I can answer some of your questions for you.
I'm at level 19-20 now and am looking for Colony 6 after Juju's capture. A few questions:
1. It seems like the game wants me to find the next location on my own after I go through the road; is that correct?
2. Do I need to worry about becoming overleveled? I'm already a few levels ahead of the enemies I meet. I've done some quests, but I haven't gone out of my way for that many. The possibility of becoming too powerful and steamrolling everything is keeping me from exploring as much as I would otherwise.
3. I have a bit of a hard time selecting the right enemy in combat. When I'm fighting a bunch of bad guys, it can be confusing targeting the right one - I'm playing Reyn right now and when someone uses break and I want to topple or I need to draw aggro away from a party member I often have trouble getting the right enemy targeted before it's too late. Are there any tricks for this or do I just have to get used to it?
4. How much of a difference do gems actually make? I feel like I spend a lot of time rearranging them and I'm not sure how much benefit it really gives me.
5. Should I bother trying to fight monsters above my level? I'm guessing the level 70s are imposible at this point, but would it be possible for me to tackle the 30s?
6. Is there any way to change the camera with the nunchuck? Choosing attacks while moving is nice but no camera is kind of a dealbreaker.
7. Are the "materials" vendor trash or should I actually keep some of them?
1. Unless you turn the display option off, the game will always direct you to your next objective (this has always been the case for me up to plot advancement with my party in the 30s). If you have a "Story Memo" notice on the screen instead of the arrow, it just means you are not currently on the same map as your objective.
2. I think it's possible to become overleveled as a result of doing quests, but there are still unique monsters that can keep you in check. I do a lot of quests and I find I have usually been around the same level as the unique enemies whereas the normal ones hover around blue or grey threat levels, often turning black as I advance. If you level up your Arts and do all the quests, you will probably find most monsters too easy.
3. Make sure you're close to the monster and move the target until you are hitting the right one. As far as I can tell, that's all you can do.
5. Fighting enemies above your level is harder not only because of the stat difference, but also because you are more likely to miss an enemy above your level. Named monsters are more powerful than an average monster their level as well. That said, there are achievements for defeating enemies that are above your level, so it's obviously designed to be possible. If you level up your Arts, have good equipment, and have a battle plan you might stand a chance. I haven't tried it myself.
7. By materials, do you mean drops from monsters or the items you find in the field? If the former, you will want to hang onto the drops that have a little sparkle on their icon indicating a rare item in case someone wants them (which is entirely possible). I would also keep most of the field items as well especially in the Bionis' Leg area. The game might make it more obvious that you found something you'll need later after a certain point, but there is still a chance the items could turn up in another quest. From what I noticed so far, most of the common drops and old equipment seem safe to sell.