I've reached level 4 without leaving Fort Joy, and I can tell you the following steps are unnecessary:

4. Take the vine to the upper level of the Hidden Alcove. Talk to the girl. Kill Unnis.
5. Just inside the main gate, talk to Fara (need a human or dwarf in party, if you don't want one, invite Lohse nearby then dismiss her after this). Offer to help Fara, then talk to Jeth, then to Fara again.
6. Confront Burro and Kana and kill them without aggroing guards or nearby NPC's. Follow the elf you saved to the Cavern.
7. Just before the Cavern, cast heal on Dain.
8. Enter Cavern and play hide-and-seek with Mody to reveal a mound to dig up a hatch.
9. Down below talk to Lord Withermore. You can remove his spear with sufficient strength (Kalias above sells a strength potion). Or you can attack the spear and destroy it.
10. Go to the Shine of 7 and select the option to reveal the hatch.
13. Go through the door and go straight (do not go the other way at this point). Pull the switch on the left and take the hatch down.
14. Destroy the jar on the back left (only!).
15. Return to Lord Withermore to get his belt.
16. Kill Saam and Baladir near the Fort Joy kitchen area.
17. Kill the 3 card players on the upper level.
21. Go back to Magister Yarrow and give her Migo's ring as proof.
22. Follow Magister Yarrow back to Migo's beach. Kill her and take back Migo's ring.
24. Go down and kill the lone fire slug.
31. Kill all NPC's in the Cavern.
33. Go to Gawin. Finish his quest or kill him and take his robe.
- I haven't done any of these on my level 4 party.


12. If you have level 2 thievery, pick the lock to the door to the Main Floor.
- Unnecessary, as you can get the key on the stool even with level 0 Sneak


20. Kill Migo and take his ring and armor.
- I took his ring, but didn't kill him (he was too dangerous for me to survive combat. I am keeping the ring and not returning it to Yarrow.

28. Return to Stingtail and wait. Silence will fight with Stingtail. Kill them both when they are weak.
- I killed Silence, but not Stingtail. He is the Pyro vendor and I have a Pyro wizard.


32. Hopefully you are level 3 and ready to kill the crocodiles on the beach and get the teleport ring.
- I did this, but you can kill them at level 2.


Things I did and you didn't:

- I talked to Doctor Lethe and asked about healing potions, gaining XP from learning the recipe.
- I gave Dain the poisoned beer from the frog cave. He will die anyway with regular alcohol, and the doctor doesn't know the difference. The poisoned beer is always there, you don't have to rely on the RNG to provide you with regular alcohol. This method also doesn't draw Dr. Lethe into combat and she can still live.
- I used Dain's card to win 100 gold from the card players.
- I beat the arena at level 2.
- I lured the Houndmaster back to the stairs in the prison where the rest of my party is, so as to remove his positioning advantage.
- I used the Houndmaster's rubber ball to play with the dogs in his room to pass that encounter without combat. Pet Pal not required.
- I entered the Houndmaster's quarters and found the free XP point in there, and freed the locked up dog and killed it after it attacked.
- I killed some Silent Monks for XP.
- I did kill the Magister and dog patrolling the prison, but that was after reaching level 4.

So you can reach level 4 without being totally ruthless - except to Magisters, but they don't count.