That is a *major* drawback, and that might even be a dealbreaker for me, as it defeats one of the main reasons I like to play this type of game.
Fixed amount of XP/levels seems to exacerbate balance problems in RPGs. If an RPG is unbalanced but has infinitely respawning monsters, the unbalance isn't so bad because you can just grind up levels if your party isn't optimally built. But if your party build isn't optimal AND there's a limited amount of XP, you can really get screwed. This is exactly what happened in Might & Magic X.
That's not the only problem with non-respawning monsters; it also means that, once you've killed everything, there's nothing left to do with your party, as you can't fight more monsters for fun. It also makes it harder to do experiments, and experimenting is something I enjoy doing in RPGs.
Don't some games have scaled exp. The higher level you are from some monster, the less you get.
Yes, but that mechanic has its issues as well.
* If no non-respawning enemies give reaonable XP after a certain point, your final level can depend on the order in which you do things, which is a terrible way of doing things (leads to what I call the "missable stat" problem, but here with entire character levels).
* Level ups are often paired with mechanics like random stat growth at level up and skill points gained through level up; with such mechanics, there can be issues where you can't proceed because of how your stats and skills ended up, and can't get more because you can't get any more XP. (One of the reasons I like SaGa-style stat growth is that it avoids this problem (and often does have diminishing returns for fighting weaker enemies to keep the player from getting overpowered); Final Fantasy 5 also avoids it by having stats be a pure function of class and equipment, HP/MP being a pure function of stats (ignoring equipment) and base level, and abilities learned via something other than experience points.)
* It makes it feel pointless to fight weaker enemies, leading to situations where you have to fight trivial enemies with no reward. Final Fantasy 8 (which I believe does have the mechanic you mention) avoids this by having enemies scale with the party's levels, but at the cost of making leveling up hurt the player, which is probably not worth it.