There are alternatives that give the same feeling, but manage to make sense.
Like, as you get into a game, you might make enemies. If you go butcher a den of goblins then others of their kind will likely hear about it and respond in their own way. One way might be to cower any time they recognize you, begging for pity. Another way might be to harass you with ambushes at every opportunity.
So, if you were to be walking around, there's a chance you'll be ambushed, but unlike Level based encounter, you'll be dealing with sensical things that have a reason to be finding you in all sorts of places, and would be appropriate to the story and common sense (ultra powered boars that require magical weapons to kill doesn't exactly strike me as sensical). The goblins would be ambushing you, which is definably more difficult then them being stalked and killed (the most likely way a single person could clear out their den), so "appropriate to level" (though i'd prefer a lack of quantifiable level, and instead use a mix of player skill and character skills) comes into effect due to it being similar monsters as previously, but with them on the offensive and as such in a slightly more difficult scenario then you've previously shown yourself capable of.
Assaults based on your previous actions, and more difficult scenarios instead of overpowered animals to meet your level, seems like a much better method. And the whole getting loot for your level thing is weird, with it you just create a system of exponential growth on loot, which just makes treasure gain an ever increasing guarrantee (which demeans the whole joy of finding treasure and turns it into an addiction - "i need more!!! a bigger hit!!! i wont keep anything not ebony or better!!!").