A 3rd state might work, but I was thinking of just modifying the combat mode to have your character auto-target auto-attack. Basically use the sight of the character to determine if someone is close enough to attack or not in combination with responding to an attack from ranged enemy outside the character's sight. The A.I. would work similar to the Dreadknight summoned from the Demonic Aid skill.

Here are the benefits of auto retargeting and attacking of enemies:

1. Your character will never just stand there and get pummled to death.
2. Saves the player from constantly having to target a new enemy when the existing one dies. This saves the players hands and wrists. Not only that in an area where there are alot of items and containers around, your character won't be picking junk up or moving around all the while being a punching bag.
3. Allows you to focus on using spells and skills during a fight.
4. Less of a worry of being killed by a weaker creature when you need to be afk for a sec.

Of course you would still be able to manually target a certain enemy or run away if you want. Overall, I feel this would be a great change to the game and make it less grueling and more playable.