I have simple answer. The simplest solution and the best one for balance is to set some checkpoints like: coming to fort joy, finding way in magister's headquarters, getting out of it. etc.
Side quests and killing should only give items and money as reward, because they don't directly help in progress main quest. They will be pure optional choices.
If you want level up you need to actually progress, no backtracking or randomly kill everyone.
That solution doesn't force anything, and is nice gift for people who only want to do main quest only. People who like doing combat, quests and stealing will have extra items, skills and gold.
I'd be fine with this tbh, as it doesn't remove the reward for doing extra work / doesn't cheapen then decision to spare/kill bad guys.. but would uncouple the level/power imbalance and keep the game challenging even for the evil hobo barbarians everyone keeps mentioning (I imagine they are also cannibals amirite?)
