It isn't really about cheating or godmode. It is about implementing situational spells.
Cleansing fire simply isn't as appealing if you have the opportunity of using it every 3 or 4 fights and even then you think about using it because... it is not better than throwing a fireball. Skills are supposed to be "balanced". Now you might say "hey cleansing fire should be stronger. that would be balanced".
Yes, you could make it stronger until people would start picking it, but this can be really contrived (like it now cleanses everything, which was not intended, and increases resistances because pyro should not have heals for reasons but it needs to do more because we cannot buff resistances by more than 30% and so on...). You might end up at a point where this spell is both so strong and so situational that it is more like a necessity; you need to take it for the rare occasions where you would be at heavy disadvantage without it and play the game with basically 1 skill less.
If you instead give unlimited skills to the player this problem disappears. You can either change the skill - the way you imagined - or change the specific encounter where it might be too useful. At the very least, you can leave it as is without doing much wrong.
Possibly the best example of competition victim might be Witchcraft: Resurrection. Why choose it/invest 5 points if scrolls are so fundamental and overly accessible?
It's true that situational skills are hard to balance, but I think purifying fire (the pyro cleanse spell I think you mean) is actually quite versatile. Cure burning, frozen, stunned, charm, or healing on shields on enemies? Probably most fights have a chance for one of those statuses. Most of the cleanse skills seems pretty versatile. But to your main point, unlimited skills might sort of solve the problem of situational skills, but it creates as many problems as it solves. I'd say it's easier to make skills versatile enough that they don't feel ultra situational than to balance having unlimited skills.
Resurrect wasn't quite balanced right, but a 60% health rez is way better than a 20% health one for the scroll. Probably would make the scroll cost 8 AP and the witchcraft one 6, too, so there's a definite advantage to the witchcraft one. Morning Person is probably more to blame for making the spell useless, since scrolls are then just as good.
