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So, Might and Magic 2 feels a lot more combat heavy than the first game. Because of this, I feel like high levels are far more important in this game than in the first one. So, where are the best places to level grind, and about when can I start using them? So far, I've just been usimg auto combat on the goblin villages, but that takes a while.
The battle with 3 Cuisinarts, which is found on a mountain square in the overworld.

If you know what you are doing, you can win this battle without winning any other battles first; this will give you enough experience to raise your levels into the 20s. (I have actually done this; the attached screenshot is proof.)

Be aware, however, that the higher your level, the more enemies you'll face in random and placed encounters. (By placed encounters, I mean encounters that are in a specific spot, but the enemies are random.)
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I've heard higher levels mean more enemies, but I figure if I get my level high enough, it wouldn't really matter after a while.
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ethanland: I've heard higher levels mean more enemies, but I figure if I get my level high enough, it wouldn't really matter after a while.
The problem isn't so much the difficulty, but rather the tedium. Fighting 100+ enemies every battle does get old after a while, especially since the only spells capable of hitting more than 10 enemies either only work outdoors or only work against undead.

Winning most large battles isn't that hard if your characters are fast enough to act before the enemy; turn off the sound before hand (the sound slows combat down, as it has to play before the battle can continue, which is annoying when there are 100+ enemies that need to die), cast Power Shield (makes you lose less HP when you take damage), and just Ctrl-A (IIRC) to auto-battle; as long as the enemies are vulnerable to physical attacks and don't have absurd HP totals, you will win the battle after a while. Now, if the game decides to spawn something like 100+ Orc Gods (50,000 HP each), then you will likely want to run away and hope the game gives you a more reasonable encounter when you return to that position.

There is also an option you can change that affects the number of enemies per encounter; as you reach higher levels, you will want to change that.

Note that fixed encounters (those with a fixed group of enemies) are not affected by any of this.
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ethanland: So, Might and Magic 2 feels a lot more combat heavy than the first game. Because of this, I feel like high levels are far more important in this game than in the first one.
For what it's worth, I never felt the need to power-level in the game; even when tackling optional challenges I just went for it and gained levels along the way. One thing that did help, however, was boosting my party's stats to really high levels. You'll find ways to do this as you explore, so it's not a matter of grinding so much as it is searching the world and solving some puzzles. Although you can repeat the stat-boosting process a few times, so that is kind of like grinding I guess. Doesn't need to be done ad nauseam though, just a few times.

This doesn't mean that you shouldn't grind for levels if you want to, of course. Just that you shouldn't necessarily feel like you NEED to.
I've powerleveled via Cuisinarts many times. Just use healing spells, Herbal Patches, etc. to keep the party alive. You also get LOTS of spiffy loot!

Also remember you can change the difficulty of random encounters in the options. "Death Master" is the highest difficulty while "Inconspicuous" means you can likely auto-attack your way to victory with little harm to yourself. I used Inconspicuous often to avoid much of the ickiness of grinding.
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Endarire: I've powerleveled via Cuisinarts many times. Just use healing spells, Herbal Patches, etc. to keep the party alive. You also get LOTS of spiffy loot!

Also remember you can change the difficulty of random encounters in the options. "Death Master" is the highest difficulty while "Inconspicuous" means you can likely auto-attack your way to victory with little harm to yourself. I used Inconspicuous often to avoid much of the ickiness of grinding.
Using the Cuisinarts isn't that simple when just starting out, as you need some reasonable way to deal damage. It can still be done (I've done it, and I know how to do so without using the glitch I used), but it can be tricky. Also, I believe the Cuisinarts can frenzy and kill your party unless you have a lot of HP (but Max HP potions exist).

The option to change the difficulty seems to only affect the size of the encounters. With that said, at high levels you want to set it to "Inconspicuous" just so that battles take less time. (Also, before you auto-attack large groups of enemies, you usually want to cast Power Shield.)

One more thing: Being faster than enemies helps tremendously, as each enemy you kill before it attacks means one fewer attack received that round. This makes a big difference in the amount of damage you take when auto-attacking. So make sure to raise everyone's Speed to at least 50. (Also, turn off the sound; it slows down the game.)