There are only 2 formations I can see if the party only has 4 pcs: the Square and the Line.
The only thing that really matters there is whether you want the PC leading from the front, or taking up the rear.
The square just becomes a wedge with fewer than 4 in the party, basically whether you want leader up for scouting or running interference, or behind for guarded ranged or casting etc, its similar just with one exposed flank in the front or the rear.
Square/Diamond should be the all purpose formation for free roaming outdoors or above ground.
The Line is better for dungeon crawling, or hazardous terrain, sneaking or avoiding traps and the like.
Obviously its more interesting with more PCs like say 6. It still doesn't feel gold box caliber to me without 6 PCs, or a clean dozen with summons. Then you can get cooler formations with rings or wings maybe, but the environments are too small or else cam doesn't let us zoom out far enough to really make much use of the formations idea.
A follow mechanic is good, but the chain just feels clunky. Dragging portraits out and back into each other is obnoxious and click intensive. Especially since you don't really interact with the portraits for anything else, like say casting spells. Its also not the easiest to tell the leader position, I think vertical portrait orientation is better. Leader at the top. In any case its just not simple enough to group/ungroup select all. I don't see myself doing much co op but if it was well designed I might use a controller to play this game. Its too bad they don't have much controller support for the EA except stadia I guess? Cause this seems like it would be a good time to get that dialed too, if they're hoping to go that way. Anyone tried a pad mapper for xbox controller or anything like that? I don't feel like I'm getting all that much from the mouse and keyboard. I'd probably just go for DA or Kotor style and bumble about with the thumbstick.
Of the top of my head there are five useful formations for a party of four: the line and the square, that you brought up, but also the Diamond, and the T and it's reversed, upside down brother.
Diamond (♦️) is probably the formation I would use the most. Heavy melee in front, secondary melee and half-fighters in row two, the most frail character in the back. The T puts three melee or fighty characters up front and one frail in the second row. The upside down T puts the heavy alone in the front and the frail one in between the other two, flanks secured by less frail companions.
However, allowing formation isn't just about the shapes of the formations - it's also about who goes where. If I can build my own formation I can have my wizard character in the back even when he is the selected character. That way he will be protected during exploration yet still be the one who enters dialogue when I click on an NPC. And that kind of quality of life features makes party/character selection so much less of a hassle to handle.