I agree that by the end of Ys, and a fair bit before that, the combat became completely useless. Once I got to level 10, there was no more point for me to fight enemies, and I just wormed my way through them. Dark Fact is seriously an excellent boss though, hard as nails, yet epic at the same time.
Ys 2 the leveling thing seems like a non-issue now. 55 levels, magic, and tougher enemies seems like it will keep me invested for the longer runtime.