My on screen keyboard is giving too many options for each individual letter and character...

^Yep - you should see a progression bar for each characters individual ability at the end of each round

There's three tiers for each ability that will give you better stats, such as increased damage, longer effect etc..

you can level up your abilites in Solo too, so if your struggling with a certain character, you could try them out and level up a bit this way first to get to grips with them!

Keyboard and mouse support is a touchy subject on xbox as most people see it as a huge advantage over players that use a controller.

The decision is up to the developers of each game, individually.

I highly doubt that many games will ever support it due to splitting the player base on the advantage that keyboard and mouse presents.

But do you mean to enter a letter, or a paragraph or to confirm what you wrote?

If you mean to enter a letter, it's a button on the gamepad.

If you mean a paragraph, the enter button on the onscreen keyboard has the same character as the enter button on the computer keyboard.

And if you mean to confirm it is the MENU button.

It is normal. Much like holding down the letter A on your phones keyboard, you will get A’s with various characters over them. It is for foreign languages.

RPGs these days give the player far too many options. The best thing I think is to restrict the hell out of the game. Free-roaming is good and all but it loses its appeal when you know you nothing is stopping you from doing everything and joining every organisation.
A game like FFXII failed because it gave you too many options with how to customise your characters, but FFXII:IZJS forced you to pick a profession for each one and the paradoxical effect was that the game was more strategic and enjoyable with all those options
taken away from you.