dtgreene: I happen to dislike this sort of mechanic, as it makes level have too much of an impact, resulting in things being either too hard or too easy, just depending on relative levels.
In fact, I would say this is the main reason why Hoshigami: Ruining Blue Earth ended up being such a terrible game. If you try to play the game as intended, it ends up being frustratingly difficult, while if you solo the game so that your one character gets more XP, you end up out-leveling the enemies and the game becomes trivial.
Level should not make that much of an impact.
(Note that I haven't actually played the game I mentioned.)
abbayarra: Wizardry 8 also did the same thing although due to level scaling it is less of an issue. So I'd say level scaling with a mechanic where hit rates and damage scale with level difference works okay, in a game like Avernum it is just a mechanic to let players know to come back later without actually making it so you can't reach the area until you hit certain thresholds. In later games Jeff does cut off areas that you can't reach until certain chapters so he did learn from what he did. I guess that is a sign of good game designer.
Except that I don't remember Avernum 1 having this mechanic.
For a non-linear game, I prefer level to not make too much of a difference. Dragon Wars, for example, is a game that handled this better (though equipment ends up being a big deal here).
Even in a linear game, having level not make too much of a difference definitely helps, especially for those who like to do challenge runs. For example, Final Fantasy 5 can be completed with everyone below level 5, mainly because the mechanics allow it. In FF5, as an example:
* Level does not affect hit rate. It does affect the damage multiplier, but since that's applied after defense, your level doesn't affect whether you can damage high defense enemies.
* Level doesn't affect what abilities you have access to, though it does affect MP (so high level spells might be too expensive to actually cast later on).
* There are actually ways to temporarily boost a character's level, in order to do decent damage at a low (real) level. There are also ways of doing level-independent damage (one spell always does 1,000 damage, though it might be too expensive to cast), and of producing powerful magic effects early (like breaking rods).
* Enemy attacks tend to be single target, something you can be immune to, or something that does damage as a percentage of max HP, making them survivable at low levels. (And even then, there's Hide and Jump to avoid attacks entirely.)
I much prefer this approach to how games like Hoshigami and many Ys games handle it, where one level can make a huge difference.