As for the issue of fast traveling teleportation : It isnt the issue of having it or not - at all
Its just whether it should be under the players control - as an option to choose, or not.
It is the fact that it is not a choice that is actually most galling and irritating here. Set up like this it actually has an unintended effect of turning attention from the story and its quests and gameplay to frustration about design decisions that are not necessary - in this sense of it being mandatory and forced.
Help me understand it then.
If you're doing a city quest, then talking to NPCs is mandatory. You aren't forced to talk to all of them and are often given choices there, but you do have to talk to some of them. Since walking from A to B is uneventful in 99% of RPGs, why not skip it, thus letting you focus on interaction with NPCs (which is the focus of town quests), not walking between them? Sure, why could have made it completely optional, but why? What does the other option add?
You are teleported only within a quest. Between quests you can walk around all you want and explore. There is no teleporting in the ruins either, since the focus there is interaction with the environment not with NPCs. I do agree that the implementation is a bit jarring, which is probably the main issue here. I liked Castanova's suggestion and already asked Nick to see if you can do it.
Let me first say that i dont agree with infinitron first two interpretations - at all. And the last one too.
that being said...
I dont know how much better i can explain it from what i already wrote about it.
The problem is that it is forced.
There is no hidden reason behind that. That IS the reason.
Just the fact that it is forced on the player creates a negative reaction to it.
I would also agree with LV assesment:
I understand the need for it when replaying, but making it optional wouldn't ruin the first experience. And Lord knows how much that one counts.
That is actually a secondary negative effect that arises from it.
There is also an issue of teleportation not being implemented in the best ways in certain quests - which you mostly fixed by making it optional in those situations in R2 version, based on reactions and feedback you got about specific quests where teleporting led the player into trouble.
You need to ease people into it all... which you dont see clearly yourself, being so invested into creating it all and building it for years and knowing it inside out. (which also seeps into your resistance to make combat a bit easier at the very start of the Demo, although it can be argued that demos combat difficulty at large is there to prepare the players for the full game - if you need to. This is also not a question of combat being entirely hard of completely easy)
People will opt to just walk somewhere more often when they start, but then as the game itself is designed for replayability, when they repeat those sections they will start to use it more and more.And be thankful for it.
Of course.
But that doesnt mean they should be forced into it.
We all like having some options to choose from in games... and this one certainly falls into that category.
-edit-
Also, establishing shots would be a nice addition - but those require some work to do.