You can gain stat and skill points by mindreading, in addition to the odd quest or alternate quest solution. I've mindread relatively liberally, and it hasn't hurt my level any.
I also ran into trouble with the level 9 bandits the first time I encountered them (after clearing out the goblins to the east and west of where you meet the dragon knight), but just went in a different direction. That is when I headed to the derelict tunnels (entrances in each of the goblin areas I had just cleared) and went up a couple levels IIRC. I've never had to search very hard for someplace to go that suited my level.
