Given that D:OS is turn-based and combat can be slow enough as is, I'd prefer level scaling over monster-number scaling. In a faster paced RPG like Pillars of Eternity or NWN, monster number/type scaling probably works better. City guards could scale levels a bit too, but it's already an issue without level-scaling; for example, the fire-undead to the east of Cyseal could probably invade Cyseal and kill everyone easily.
Plus it's much easier for Larian to implement level scaling than to increase the number of monsters based on your level. I agree that you sacrifice some immersion to have rats or goblins or what have you scale up their level simply because you encounter them later, but I think D:OS already doesn't regard levels in the same ways as pen and paper games. You fight orcs early in the game and also very late in the game, and they don't look or seem that different overall. Scaling is just how video games have to work to artificially act as dungeon masters and make the game challenging (and also save money on model design.)
The best case would be to let the player choose whether they want level-scaling or not, but that might be hard to implement.
