I am starting "On thin Ice" and suspect this is to be the climax in the game.
However I'm on level 35, have a treasure quest available, recommended level 48
and weapons rated for levels forty something.
Not sure whether to do this quest now or go looking for more side quests.
I would like to reach the top level if possible.

Even after finishing the main quest you can continue playing.

You will never reach those kind of levels without multiple playtroughs (atleast I can't think of any way). I did mostly everything and I was also like 34, 35. Most side quests gave like couple xp and enemies are no better.

I say that go for it and try it. =)

With "new Game +", I only reached Level 64, and I still picked up equipment that are higher levels. Only "Level 32" on 1st play through. My bet is that those higher levels are attainable on the upcoming expansion add-ons.

When I started to install "new game +" I got a message stating that my system was not compatible, well, something like that,
so I left it out but installed all the other add- ons.

I had the same issue. Upgrading the game and redownloading the NG+ DLC fixed this.