While I really wanted this game to meet the expectations of earlier fantasy strategy games, the current implementation, while vastly better than was the mess that was EWOM (but then, that wasn't fit for release), just leaves me cold in so many ways, which caused me to rate it poor. I fully expect the polishing over the last bit of the beta towards release to bump it up to the mediocre category, but that is all.
The problem is, while there are a lot of mechanics that I quite like (faction differentiation, while in need of some balancing, is pretty well done) or find at least adequate, there's nothing that really to me stands out in a positive way, while there are a lot of things that stick in my mind in a negative way after testing FE these last many iterations. Most of these are design decisions that I just plain disagree with rather than being bugs or poorly executed ideas, so it is hard to criticize the developers for it, but there you have it - it still forms my overall opinion of the game.
I'll list a few obvious ones from the top of my mind - and yes, I'm sure there are people who like the way these things work and I am not saying they are wrong to do so, but I don't like it, and we've all been asked to give our own impressions rather than trying to guess at what "most customers would like".
City locations:
1) Having the starting tile be so blasted important. This is practically always the case in 4X games, but FE takes it to extremes. Now, on some map settings (temperate/mountainous) you do have a realistic chance of a second starting area fairly nearby if the first one is too poor, but mostly, you don't really, as you lose too much time scouting around with your sovereign plus nearby companion. In its current state, FE is the 4X game that most invites the player to start a do a CTRL+N to rebuild the world of any I have played. And this is a) boring in SP and b ) a potential killer in MP.
2) Having essence so much more important than the other stats. Essence is essentially superlinear in some types of benefits (scaling linearly in both number and effect) and even a single essence allows you to increase the production of a city by 50% while killing its research (with a bit of earth magic) or doubling its initial population growth, which is huge - heck, if you've started building several cities bringing your average growth down below 1, it more than doubles growth! - and growing that very first level is a huge step. Now, Pariden is guaranteed at least one essence everywhere, but for everybody else, just about any city with at least 1 essence beats any other city without essence. Which means that the least the game should ensure (for MP balance reasons if nothing else) is that everybody gets a reasonable starting position with essence; If nothing else, then through the addition of a one-shot building with an essence bonus - the obvious solution here would be to let the Tower of Dominion grant +1 or +2 essence in addition to its current effects or to add a special one-per-faction building granting essence to the capital automatically when built a.k.a. the "This is where I deposit the heart of my power, around which I'll build a new civilization" scheme. [My preference would be for such a unique-capital building granting +1 grain, +1 materials, and +1 essence to make the capital something truly special, but that's just me]. (Earlier in the betas this would have been an awful idea due to so many enchants scaling by total city essence, but with most of the strongest enchants now granting a fixed bonus, it is less of a worry).
3) The decision to only allow cities to exploit resources that are next to the starting tile. As if the triple g/m/e yield wasn't annoying enough already for the choice of starting location, this decision both discourages player city-snaking and funny city-shapes in general, it also fails the test of "does this bloody make any sense whatsoever?" And the answer is no. If a city expands to be next to a forest but cannot employ woodcutters or a city expands to a river, but cannot build shore related infrastructure, while the city WOULD have been able to it if the city had been founded in a different tile right next to the same shore or wood, it fails the test. This is a game-balance decision regarding activities that are presented in game as being mundane and non-magical, and the expectation from players will be that they will work as they do in the real world. Where millenniums of civilization have told us that you damn well cut down trees if you've got them and take advantage of rivers if you are near them, not only if they are right next door. Natural resources are too valuable to waste just because they aren't optimally convenient to gather. (Which, funnily enough, is also the game's approach to all other resources - hence the outposts).
Cities:
1) The idea of having city specialties or level-upgrades that are active "only when the city is idle" such as the conclave bonus and some of the conclave upgrade options is atrocious. You've already done your level best to slow down production of buildings and troops - now you further want to give us a "bonus" for reaching higher levels with cities (something that requires more turns spent on building food buildings rather than other buildings, such as research or mana producing ones) that requires the city not to produce anything to be of worth? Are you bloody kidding us? 
2) The minimum three turns to construct anything regardless of how simple it is and how productive the city. Pure and simple, I hate this decision. It goes against the entire production model (you can only produce one thing at a time, BUT you devote your entire productive capacity to the thing you choose to build) and I cannot find any way to justify it to myself. It has severely counter-intuitive consequences, such as making any player capable of elementary mathematics choose building orders to avoid wasted turns due rather than focusing on what he actually needs right at the moment or in the long run. This problem is not unique to the "three turn rule", but that rule exaggerates it. EDITED by Peter: This one is gone in the latest beta, thankfully.
3) City growth... Yeah, totalPrestige/nOfCities, set to zero in cities without growth potential. How fun. Here's an idea. How about making that totalPrestige/nOfCitiesWithGrowthPotential applies to cities with growth potential and 0 to the others? You know, if I have a prestige of 4 and have two cities, one that has a food surplus (and hence growth potential) and one that has no food surplus, why the hell are those 4 people who magically arrive each turn splitting up two going to the place that can feed them and the other two dying off? Why don't they all four go the city that has room for them? Now, neither the way I suggest nor the way it actually works makes much sense, but with my suggestion there is less "wasted population".
4) Towns. Let towns further faction-wide growth, not just faction-wide food (and own town growth). That's all.
Champions:
1) Having champions be so damned important while having a strictly limited supply of them all placed on the overland map and vulnerable to player interdiction has always struck me as really unfortunate. I try to think of it as a strategic challenge, but, really, I'd much prefer that some were available on the map at start and others appeared to players through random events offering their services throughout the game, such that somebody starting in a sucky starting position or in a world where the map heroes get killed off early, which happens occasionally, would still have a chance of getting some heroes throughout the game. This is mere preference, but it is my preference as I've always loved the "A hero has arrived at your gates, do you want to hire him?" events in 4X games that feature heroes. So there. 
2) Bashing monsters with clubs > magic even for mages unless they are highlevel mages with a thriving civilization feeding them a huge amount of mana per turn. When the early and even mid-game game for a Warlock like Magnar consists of running around bashing skulls in with a war staff, you've got a game-balance problem if nothing else. Summoners can spend 30 mana once and minor upkeep to get a pet that'll crush most early-game challenges, and Procipinee of course wins in the "how many enchants can we stack on a bimbo who'll run around bashing monsters with clubs" category; Characters with combat magic paths spend dozens on mana on being overall less effective or doing less damage than they would bashing monsters with clubs or stabbing them with pointy sticks. This is bordering on silly for many characters, but it is way across the silly line and into what-the-hell territory where Warlocks are concerned. How about giving them an across the board magic cost discount of a significant magnitude (50%-75%) on top of the bonus damage - if it creates problems with stacking cost-reducing modifiers, then let those modifiers be multiplicative rather than additive in the first place. Or do something else, but don't, for the love of god, let this silly situation prevail.
3) Combat and questing being the only ways to gain XP for champions (outside the single building per faction). You know that you've got a poorly designed system, when the only way an GOVERNOR HERO can get better at GOVERNING CITIES, which is supposed to be his raison d'etre, is to run around in the wilds poking monsters with a pointy stick - or spend his time in the single faction-wide adventurer's guild every player is entitled to.
...ad 3) Heck, Fall From Heaven 2 got it exactly right - let every single champion and every single unit regardless of where it is in the world slowly gain experience every single turn, simply for being alive and training to be better at whatever it does. Cap it at some nice level if you feel the need. Trained units from fortresses are still better right out of the gate, but surviving in this world will make you better over time.
...ad 3) Then add bonus XP to any champion stationed in a city while anything is being constructed/trained or, perhaps, do so when construction/training finishes. Either works. Dividing the bonus XP amongst several champions in the same city, if more than one is present, the same way XP is divided for combat groups, of course. Perhaps give double bonus xp to governor champion as it is his specialty. Hey, presto, champions just gained a lot of versatility they are currently lacking and provide the player with more interesting tradeoffs in deploying them.
and more, and more, and more... Magic? Don't get me started. It is severely limited in scope, in short supply, and in ambition. [To be fair, though, ever since I started playing the Dominions fantasy strategy games, ALL other fantasy strategy games have seemed limited in ambition and scope with regards to magic]. And then there are the small annoyances, the "don't they know that players crave clear feedback?" issues... You know, the SMALL things, that don't make or break a game, but can in aggregate make a sub-average game mediocre and a good game great.
Small annoyances:
1) Why is there no mouseover tooltip for quest rewards? Sure, it is nice to know that I'll receive an Awesome Sword of Unforgettable Doom or, perhaps, an alchemy spell - but why not present its detailed information in a mouseover tooltip when the reward is presented in the quest popup? Given the effort in providing useful feedback in other areas of the game, this seems to be an oversight.
2) Why is the presentation of the perks a champion has picked up so untidily in a long scrollable list? Some sort of consistent sorting (blood type, <specialty>, <magic paths in specific order>, other bonuses in specific order depending on type) would make the presentation much clearer. As would grouping several related perks together (e.g. if a champion has 3 XP perks, then why not just show them overlapping horizontally by 3-4 pixels per perks taking up ONE slot in the vertical list with the total XP bonus from having them shown besides the stacked icons as a single number? Same with everything else that stacks.
3) Trade caravans, all going to the capital city and increasing income based on a percentage of the capital's income. Making a good case for the capital being a town. It is a simple game mechanic and it works, but I can't help feeling that it a) doesn't make any sense ("we'll only trade with your capital regardless of whether your capital is a rich trading town, a fortress city, or a conclave") and b ) would be so much better if - if only one city had to do all the trading in the first place, the player would be able to choose which of his cities it would be. (E.g. by adding a button to the city screen, "make this city my worldwide trading hub"). You know, let the player change his trading hub as the game progresses and his cities are built rather than, once again, tying YET ANOTHER restriction to the first city he founds.
4)....TRULY minor... Why hasn't the warhorse and all the other non-basic mounts not been updated yet? With the increased capabilities of the basic mounts, the special mounts have become a bit of a joke.
Okay, I could probably go on like a broken record, but you get the point. Despite the technically decent state of the game and its pretty good stability, it is, for me, just not all that fun at this point in time - the way games such as Age of Wonders I-II, Civilization: FFH2 mod, Dominions I-III, Heroes of Might and Magic I-III, Lords of Magic, Master of Magic, or Warlords I-III were, because they all presented me with a few things that I both liked and were memorable, whereas Fallen Enchantress is full of things that mostly work decently, are solid pieces of software engineering, and feel distinctly... mediocre.
There's lots of potential here for being a truly great game as many of the fundamentals are rock solid, but it just isn't realized.