Wii has some very nice JRPGs outside of Xenoblade
Arc Rise Fantasia had some interesting systems and worked pretty well, and my timing was pretty good since it scratched a "traditional RPG" itch. Story and characters were not so good though, it was far from a complete package.
I didn't really like Last Story much at all. It felt like FFXIII with a town hub and worse combat. At least some of the characters were good.
The only other Wii RPG I've played is Fire Emblem, and it's really good. But that's a SRPG so I'm not sure it counts, and I can't speak for anything else.
I think Xenoblade is more of a complete package and ultimately more enjoyable than both Last Story and ARF. No game is going to be for everyone though, so it's understandable that you'll see complaints, especially when it comes to JRPGs which can vary so dramatically and still manage to fall under that label.
(Though some of the complaints here are kind of baffling, why would you make any determination about the story or characters when you're less than 20% through the game? Xenoblade's main story doesn't even start until nearly halfway through.)
But you know, I could probably complain more about Xenoblade than most of it's detractors and I really like the game. The fact Takahashi sees it as an experiment is fantastic news to me and makes me look forward to his next project, because they have a great foundation to build and improve on.
And more on topic, the fact a niche game like that was nominated so regularly says enough to me. I couldn't really care less if whether or not it wins, but it's getting respect just for being there in the first place. Especially considering how little "formal" marketing it got.