Yeah, it's ironic that the more important something is, the harder it tends to be to understand. When it comes to big expository back-story, often enough the game has some old guy deliver it in a grandiose and linguistically pseudo-archaic way. Plus, if you're trying to play a CD RPG, there's a good chance that it will be voice-narrated without any text to accompany it. Didn't Ys IV do that in one part?
I was in a very similar boat as you when I finished university. JLPT2-ish, probably in the range of 1000 hours total of proper study in and out of class, could trudge through things if I had a dictionary, and could sort-of-but-not-really "get" what all was happening. Not studying properly during my last year of college is one of my biggest regrets of all time, but literally none of my classmates were doing it either, and the department wasn't going to fail everyone. Actually, my speaking and grammar were above average, but I had a strong dislike of kanji. To be completely honest, I probably only had a good grasp of about 300 or so when I graduated, plus another couple hundred that I could get if the context gave me enough of a hint.
Then I wound up in a crappy job in the middle of nowhere, Kyushu, and thought that better Japanese could be my ticket out. For one year, I crammed nothing but kanji and vocabulary for three hours a day, and I finally got the whole 2000 jouyou kanji under my belt. That changed
everything. I felt like I could actually read. Even when I had to look up words, I usually knew the kanji readings, so it only took a couple of seconds. Better yet, though, I found that I could tackle things without a dictionary and still usually get by. This was like the dawn of a whole new era in my language learning.
I really think that nobody is going to be able to feel like they "get" a Japanese RPG until they've studied for over 2000 hours. There's some joy to be had in understanding some of the easier NPC bits and whatever else, don't get me wrong. But to me, playing an RPG at that level is more of a means to an end; it's essentially part of your studying. If you're looking to experience and enjoy an RPG story as and end unto itself, then you will need to have studied your ass off to do it.
Here's an example from Xanadu I. The language is quite plain, and the scene is very simple. It's at the beginning of a chapter, so there's no context other than that the main character, the guy with the blue cape, has just arrived in this town. His name is アリオス, his "rank" or "title" is 百騎長 (a made-up word, basically), and he started the game in a place called クロロス.
https://dl.dropboxusercontent.com/u/32377930/scene.mp4I wonder if anyone who has studied less than 500 hours could paraphrase what's going on here in some detail? I wonder if anyone with less than 1000 hours could do it without using a dictionary? It's a basic scene, but it sets up what happens over the whole chapter's story. If you didn't "get" what just happened, then what did you get? What are you getting as you continue to play?
I really hope I'm not coming off like a snob here. By all means, anyone who's curious should give studying Japanese by/for playing RPGs a go. I've met some incredible self-taught people, that's for sure. And heck, one of the main reasons I started studying Japanese myself was to play JRPGs. Just know what you're getting into, and have the right expectations and attitude. It could be the start of something really cool in your life.