I have been playing for a good chunk of time now, and I'm delighted to see that magic is a worthy damage choice... However, it outshines by FAR all of the physical abilities (counting melee attacks).
Magic delivers:
-heavy damage
-in an area
-with crowd control
-usualy adds various DoTs...
-oh, and gets the awesome height damage bonus
-requires no real investment to be able to use all of the schools with the same efficiency.
Now don't get me wrong, I find it awesome that magic is a worthy damage choice (in the previous game, magic was brokenly good for area CC and making your life a LOT easier, but did no damage later on in the game)
Melee (and ranged physical weapons) on the other hand:
-requires a "at character level" weapon to deal damage that could maybe rival magic
-has no splash damage or real AOE (though I haven't played with 2h weapons yet)
-no real difference between weapons. Sword, axe, mace, it doesn't really matter (since the three types of damage seem to have gone away) And rapiers are gone?

-very, very little pool of available skills. Playing with daggers allows you to use warfare and dagger skills. But anything else (warfare or huntsman) only lets you off with a few skills and no real opportunity to have interesting chains, unless you splash with magic.
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So, that said, here is my suggestion for a reworked melee system:
=>Weapons have a 3 hit combo DEPENDING on what weapon is in your main hand (also works with ranger weapons).
This allows the player to make a choice: does he want the high damage numbers of this new axe, or does he prefer keeping the 3hit combo of his trusty greatsword?
=>any physical ability using 2 AP counts towards the combo
=>Combos work the following way:
*1st stage: no bonus damage or effect
*2cnd stage: bonus damage and minor side effect (cleave, pierce, lowers damage dealt, etc etc etc)
*3rd stage: major damage bonus and strong extra effect (a 2h mace would for example do a large slam on the ground, dealing massive AoE damage and making Oil errupt)
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Pros
=>This design gives the player more choices to make:
-Would I rather keep 2 AP to be able to pull off a huge combo in the next turn, or would I rather be able to do a minor combo each turn?
-What you chose to play with is more important than just looking and the damage numbers.
=>Makes the physical builds less reliant on finding new weapons every few levels.
=>more ways to combo with your partners.
=>More content?
Cons
=> May amplify the current powerpikes players have when they find a new top level weapon.
=> Does not change the fact that physical classes have less stuff to play with than magic classes (mages never auto attack. Never. Too many skills. While with my rogue, I often end up with all damage cooldowns activated).
=> Will make the physical damage dealing system a bit more complex (but come on, DOS2 is a complex game to start with

)
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List of potential combos effects (besides the bonus damage:
1h weaponry
Axes:
2cnd stage: bleeds the target
3rd stage: in a cone, if the target is bleeding, sets "heavy bleeding"
Swords
2cnd stage: grants 5% chance to parry for 2 turns
3rd stage: next projectile or attack will be parried
Maces:
2cnd stage: deals +25% damage to armor
3rd stage: Sets suffocating in a cone.
Daggers:
2cnd stage: increases crit damage for the end of the turn
3rd stage: binds the character(can't use attacks), but gives him 2AP to reposition himself/use skills.
Wands? (Do magic caster really need *unlimiteeeeed* power?)
2cnd stage: Lower first skill cost by 1Ap next turn
3rd stage: First skill next turn has a 50% base chance to crit
RIP rapiers u_u (finesse based weapon that does not relly on backstabs, but are still worth using because endgame stats give you a bunch of crit chance %age)
2h weaponry
2h axe
2cnd stage: cleaves+ adds 10% damage per target hit
3rd stage: cleave+ cripples in a cone adds 10% damage per target hit
2h sword
2cnd stage: cleave+ increases damage by 25% if enemy has a higher HP %age than the player
3rd stage: cleave+ parangon buff: Resist "all" statuses for 2 turns
2h mace
2cnd stage: cleave+ targets take 50% increased damage if they still have armor
3rd stage: cleave+ slams the ground, dealing AOE damage and creating a puddle of oil.
2h staff ?
2cnd stage: next spell deals 100% increased damage
3rd stage: next spell deals damage as if the target had 0% elemental resistance
It could also be fun to add an elemental damage bonus to every 3rd stage of the combo(for example the 3rd stage 2h sword would make the targets burst in flame).
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Will update this post as ideas come along.