I have to say when I first found out about this punishment, I was fairly disappointed. Considering the fact that, the game *encourages* you to explore, right? It is totally common for you to wander into higher-level areas, and it is totally possible for you to pull off tricks that allow you to win fights that are designed for higher levels. So you really should be rewarded for pulling off such things. And the overleveled gears will only be good for 2 levels or so anyway, which doesn't take that long if you play the game right.
Especially when you play on Tactician mode, 1 level difference is a pretty big difference. Fighting 2 guys who are 2 levels above you in most cases means you're screwed, unless you pull off some pretty spectacular tricks. So, if you do pull off such things, you should be rewarded. That's how I feel about it.
Considering the nature of the two D:OS games, when your level progress is monitored so closely, the moment you pull off nice feats and get overleveled gears, you get punished. I admit I felt a bit bitter when I found out about this. I was also level 10, I did the quest where you only have to help this guy to help this gal and so on, they are level 12 and that quest is a level 12 quest, I suppose. This quest doesn't involve a whole of fighting, so I went through it without much trouble, and got a nice level 12 twohander. What happened next is about the same as in your case.