I'm renting this game from Gamefly and thus don't have the instructions and there's one thing that's puzzling me: the little ship icon in the upper right corner of the screen whenever you're in combat that is sometimes outlined yellow, sometimes green and sometimes red. Is it making a suggestion of what YOU should do, or is it telling you what to prepare for that the enemy is about to do?? Or is it neither?

It's telling you where their battle gauge is at. So if it's red they can barrage, yellow they can do a normal attack or start dodging, green they're below anything. If you see it going, say, red to yellow, or yellow to green that means they're dodging, and their gauge just got consumed. There's an icon in the bottom-left that lets you switch the camera angle so you can see up close and watch for attack patterns.