I liked the crafting system in this game. You could break down equipment to get the blueprints (or find/buy blueprints), and build a version with better materials. Spells could be deconstructed and modified to improve or balance the effect / range / mana requirements the way you wished (within limits).
I remember on the second island getting as far as I could go with basic equipment, until sneaking and/or tactics would no longer let me defeat remaining opponents. I headed back to the town and upgraded my characters, equipment and spells, and the opponents were no longer an issue (for example, I doubled the power of the mage's lightning spell and cut the mana requirements in half, so quadrupled his DPS).