So, I've ended up overlevelled and undergeared-any special instances that open are starting to curbstomp me, and even regular levels are starting to be tough well beneath my character level. I got several levels from starting again at floor 1, intending to farm for Embers.
Simply put, what's the best way to fix the difference between my gear and my level?

Have you been hitting all the bonus levels? That dude (you know, that dude!:P) to the south of camp is always offering up access to hidden mines and such. The loot is so so but they are all big and LOADED with baddies which means MAJOR leveling up. You can also buy bonus maps from one of the main vendors. Also don't miss the assassination missions given by the robot and always keep an eye out for the "Portal Animals"; they are kind of light blue/electric looking and when you kill one it opens up a bonus portal. Beware though, the portal leads to a group of monsters either at your level OR above it. So long as you are careful though you should be able to nail mega exp and get some REAL SWEET weapons and or armor.

My experience with Torchlight has been the opposite; the game is very generous with item drops, to the point at which I frequently have awesome stuff in my stash that I've found but do not yet meet the requirements for, and my character is loaded with superb equipment. That said, I've had interesting results by buying a high-end non-magical weapon from the blacksmith and then taking it to the enchanter to have him make it magical.

How are you doing on cash? If you have a lot of gold, you can try gambling for some items. I got an extremely good rifle that way for my Vanquisher and used it almost right up until the end of the game. And if you need more cash, just be sure to pick up all the drops (most will be junk) and have your pet run back to town to sell it all frequently.

Generally, the more expensive the gambling item the more enchantments it will have. Some of the pricier ones can definitely we worth it.

And the blacksmith vendor will occasionally have good stuff you can use.

Yeah, I have been doing most of the bonus levels I've been given access too. Portal beasts are fun, the format of those levels seems to favour my loadout so I can handle stuff AT my level-and yet trying to do dark fortress levels with the mooks about 5-10 levels lower than me got my head kicked in last time I went down (I think those summoners are part of my problem, I often realise one of those stupid uber-skeletons is eating my face and I hadn't seen it through the explosions).

That's odd, most of my stuff is at least blue, in fact most is gold.... but it's mostly at level 20 or so :P some of it enchanted, but my main weapon is at the point where I don't want to try to enchant it further since I'd probably cry and/or throw the laptop out the window if it got disenchanted (it's a max speed shortbow [do ranged weapons have different ranges?] with about 70 lifesteal, and 4% or so speed boost)-I was upset enough when it killed my 700DPS shortbow that I was trying to persuade it to give me lifesteal on (said weapon is still in my legacy chest, since the bow itself is a little short of 500 DPS unenchanted o.O)
My secondary weapon is a staff that runs the same DPS as my bow so I never really use it.

Edit: What are people's strategies as to which items to go for enchanting? Weapon/s vs armor?
Edit Update: Just gambled on a 7k chestpiece-nice upgrade, but it's higher level than I am currently! Meets all my other stats though-I like that you can tell what stats an item is likely to need (like, I have basically a null-strength build, so if it's likely to take a significant strength it's useless for me)

I don't enchant and I only use socketed items if I can live without either the gem or the item later because of course when you separate them you only get one back.

I should stress that I do not play it on insane difficulty and I'm pretty conservative about how I explore, so take that as you will.

I will point out that I love to collect sets and unlike Diablo you can actually do pretty well with that in SP. Whenever you find a good piece of a set, if it doesn't favor your class, put it in the 'mutual storage' so your other characters can get to them. Eventually you will end up putting together entire sets and that is always sweet.

Yes. Rifles have the best range, then there are longbows, crossbows, shortbows and pistols, AFAIR. Of course they can have range bonuses or penalties in their extended stats.

> I can handle stuff AT my level-and yet trying to do dark fortress levels with the mooks about 5-10 levels lower than me got my head kicked in last time I went down ...

OHHHH, the Dark Fortess. I didn't realize that's where you were.

The DF is a LOT tougher than the rest of the game. Characters that stroll through other levels and never take a healing potion in combat drop dead on ONE-SHOTS in the Dark Fortress. It's normal to get your ass kicked unless you've built the character to deal with it.

1st time I played the game was hard level - that didn't count because it's not hard enough.

2nd time was on very hard. Had a badass 2 wand alchemist blasting everything he could see. Pew Pew Pew.

Died 10 times within sight of the stairway of the 1st floor of the dark fortress. The dude was a glass cannon. So I did some grinding. played maps until he had gained 5 more levels. Each time he leveled up I put all 5 points in defense. Switched from 2 wands to 1 wand and a shield. Used haste to run away faster from bosses. Added electrical resistance because he was getting one-shotted by lightning attacks.

Back to the DF. Still got killed but was able to grind my way through the DF and slowly got more competitive. The last fight vs. the end boss was a ugly mess - got killed 20 times or more.

I guess Alchemists do better with mass summonings but that wasn't the way I built this guy.

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I'm playing a very hard level game now with a 2nd generation vanquisher. From the time she made 3rd level I was building her with the Dark Fortress in mind. LOTS of defense. Usual level up might be 2 dx, 3df. She gets away with that because she's using overpowered inherited weapons. On level 23 (the prison on the lava lake) it's not unusual for monsters to give her glancing blows. That's a pretty high level defense

I don't KNOW that she'll be handling the DF but she's in much better shape than the last guy.

attached is what she looked like at level 5 when she was able to use the over-enchanted inherited weapon. That was good enough until she made level 17!

To me, summoners are some of the hardest to deal with. Were, that is. Get the elemental protection spell going to help against their ranged attack, and then spam your AOE spells or skills to take them out right away in one shot. The knockback skill is handy, too, when the summoned mobs have swarmed on you. Sorry I don't have the exact names for those...

Also, have you given your pet a summoning spell or two?

You have a good bonus with that 70 lifesteal; if you can come up with a mana steal item then that'll help keep those AOE attacks going.

Further Updates:
1. 90% ranged damage reflection is nice-watching the entire volley of 6 posion bolts bounce off you-priceless.
2. THEY KILLED MY BOW. My 70 lifesteal bow that I was building up to an amazing legacy to pass on... was disenchanted. By an altar-I'd decided the old fella in town was too unreliable, but it only had a 7% chance at the altar... *sobs quietly in the corner*.
3. BUT all is not lost! For in my shared vault [that nobody else even uses] is the mighty Jagshard Bow! A truly powerful base weapon, a lucky roll gave it 27 lifesteal. While not the epic feast of blood that our old bow was, this combined with my lifedrinking spell will keep me going... but may require me to wait a bit longer before attempting the final boss.
4. I beat Master whateverhisname Mk 1 on the first run-through.... although he had me on about 10 health when he ran off.
5. I'm learning how to play my build better, although I wish I could rebuild it-those ten points that I put into Magic Weapons are useless. Although if this bow gets disenchanted, perhaps I'll find a wand with lifesteal to make them worth it-I'm sure a pistol/wand dual wield could be fun.
But I'm working out how to use my ice shock to slow them, then blast them with orbital cannons (ember blast or whatever the big boom is called). Just picked up ember overcharge to give the bow some more punch-I run dervish in my spells. This guy is capable of serious spiking with all his spells running-dervish plus lifesteal gives suprising durability, and the increased weapon damage is going to hurt.

Apologies for double post but:
Killed Ordrak on the first run! (I'm only level 51 or something ;) )
So, now the question is: Do I run the shadow vault over and over, or do I grab some mods and start a new character, or what?

This is the place where double posting is FINE. :D
I can't speak for the other's but when I need help I do it all the time, and when other folks do it I love helping them; makes all the hours I put into playing this stuff seem worth it.

As for the Shadow Vault, I started a new character. The problem is TL 2 came out a few days later and I haven't played TL 1 since. The SV does just go on and on and on as far as I know and by the time you get to it I'm guessing you are itching to try a new character anyway.