Now, go to Test Battle and see how this works, repositioning if needed. You'll notice one glaring detail, there's an arrow over the characters. You can move the characters around so the arrow in in theory pointing to their facesets, but since manual positioning is not really based on who's first, second, etc in the party lineup, and facesets kinda is, you might instead simply erase the pointer entirely. This has its own problems, so might instead switch from portrait to alternate mode which will at least tell which party member is selected .
Though, depending on how your game works there's a workable solution to this. Mine originally used this method, but the player creates four characters from a selection of races, classes and genders, and I only use four actual characters. This allows me to properly use the pointer to show which character is selected. Obviously, in a game with more than four characters(most standard RPGs, really), this won't quite work unless you know who will be in the party at any given time.
This is exactly why I prefer 2k3 over the other makers, though. The default battle system is already sideview, and it's amazingly simple to customize.