Imine as substituent nomenclature
Your assessment is correct. The rules concerning the prefixes ‘benzyl’ and ‘benzylidene’ have been changed. In the 1993 IUPAC Recommandations, these prefixes could be substituted, but only on the ring. According to the current version of Nomenclature of Organic Chemistry – IUPAC Recommendations and Preferred Names 2013 (Blue Book), these prefixes cannot be substituted for preferred IUPAC names, although for general nomenclature restricted substitution is permitted (see P-29.6.2).

Except for the use of enclosing marks to set off parts of the name dealing with specific structural features, the suggested name is correct. The preferred IUPAC name is 3-{(E)-[(4-methylphenyl)methylidene]amino}benzoic acid.



Note that enclosing marks are used around compound (see Rule P-29.1.2) and complex (see Rule P-29.1.3) prefixes. When multiple types of enclosing marks are required, the nesting order is {[({[( )]})]}, etc.

Concerning the use of ‘amino’ in this case instead of ‘aza’, Rule P-62.2.3 explains


  (…)
  
  Preferred IUPAC names for prefixes corresponding to $\ce{-NHR}$, $\ce{-NRR'}$, or $\ce{-NR2}$ are formed by prefixing the names of the groups $\ce{R}$ and $\ce{R'}$ to the prefix ‘amino’, for example ‘methylamino’ for $\ce{-NH-CH3}$. Prefixes such as azanyl and azanylidene may be used in general nomenclature.