Steve, nice analyze.
However - immediate xp reward for kill someone must go. If you keep that element in game it is still tempting to kill on sight and get immediate reward. If you keep element of the immediate xp gain on kill, then sweeping area from any living creature will remain.
XP gain should be only for tasks. e.g. when quest ( milestone in the longer quest) is achieved.
Solution A: Kill Victoria.
- Journal note - quest progress
- XP for completing the quest as the quest giver requested
- Material reward for completing the quest as the quest giver requested
Solution B: Kill Englandaer.
- Journal note - quest progress
- XP for completing the quest as to Victoria's satisfaction.
- material reward from Victoria
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The problem is though, if you remove kill XP the game ceases to be what it is to some extent.
As NinjaSteave mentioned last page, the design philosophy for the game N+ dictates that there must be fallback solutions. Especially with regards to the main quest. Combine that with the concept that everyone must be killable and that means you necessarily cannot rely on quest givers for all of your XP rewards.
If you kill that NPC and you never got the quest, how would you complete the task? If you can't complete all these tasks how do you gain XP and beat the game?
I think there is room to balance how intended non-combat solutions reward you to bring it up on par with combat solutions. But going farther then that changes what the game is.
