JarlFrank
I like Thief THIS much
This. And if you can't envision or implement a character growth system that doesn't involve bloat, you'll be better off ditching character growth altogether - just make a build and roll with it, it will still be an RPG as it will still have build limiting what you can and cannot do.
Also this.
Being able to best all the challenges through repeated application of grind is bad and renders all the challenges void.
Being able to withstand something that, by all logic, should turn your character into an unrecognizable smear on the landscape is bad.
Inevitable loot and threat inflation highly vertical development leads to is bad.
Highly vertical development in itself is uninteresting.
I mostly agree with you, but your second point (being able to withstand something that should turn you into a smear on the landscape) is contestable, in a way. Not that I approve of being able to take 10 hits from a dragon without being reduced to a bloody pulp, but there should be ways to deal even with the hardest shit the game throws at you - just that dealing with it shouldn't be straightforward or easy.
Wanna fight a dragon? You need specialized equipment (nets to tie his wings or something, a LOT of preparation by taking potions and charms and spells that protect against fire, ranged and reach weapons because getting close enough for the dragon to just EAT YOU is a bad idea, etc etc). Wanna fight a giant? You need to use the right tactics (fuck up his feet and legs until he can't stand anymore, preferably with a ranged weapon, try flanking or coming from behind or circling around him or even climb on him to reach his vitals). That would be fun. A LOT of fun. And more challenging, and definitely more special and memorable than just hitting the thing until it falls over and dies.
It would actually make the encounter feel like something that was a challenge, because you have to use special tactics. Sure, it takes much more effort to design it like this, you need to script enemy reactions like giants falling if they take enough damage to the legs or dragons losing the ability to fly when attacked with big nets. It's much easier to go the "lol hit it till its dead lol" route.
But this is why Dark Souls bosses are so memorable. They have their own strengths and weaknesses and you beat them by learning about these and exploiting them.