Ask a modern 3D character modeler how he'd feel about making characters by pushing vertices rather than digital sculpting(with auto-retopo!) sometime.
AFAIK while this really depends on the artist, in general artists start with a base mesh that was made by "pushing vertices", so they do both.
The auto-retopo tools can be ok for static geometry but they wont make good results for animation and even for static geometry they can generate inefficient results. However there are tools that while not fully automatic, can make the process a matter of minutes with the end result only needing small tweaks, if at all (EDIT: though with modern hardware these inefficiencies do not really matter much so at least for static geometry it is fine).
(normal baking is a more annoying process though, which is why some time ago i wrote
my own tool for that which automates the process - though TBH i only compared it to what you'd need to do with Blender, i don't know what other programs do)
Out of curiosity, what would be an example of "small scale" RPG? Could you name a specific title from the past? It'd help giving a better picture.
Shadowrun Returns that was mentioned before would be such a case for story-oriented games. Also perhaps something like classic Wizardry (though i'd point to one of the modern incarnations instead of the Apple 2/DOS ones) for combat-oriented games. Something like Fallout 1 but with modern tools may also fit (so perhaps something like a smaller Atom RPG - Atom RPG is not only much bigger than Fallout 1 but IIRC it has a lot of unique assets).
Wizardry 1? It's small scale, not saying it was easy to make, btw.
As a game it'd be fine, though most likely too basic nowadays (which is why i mentioned the modern incarnations instead), but its development process was very unique and wouldn't be helpful to judge things nowadays (originally written for fun in a university, made in BASIC and then rewritten in Pascal, the developers had to wait for tools to become available, etc - a ton of things that just wouldn't apply to modern gamedev even if we ignore the massive differences in available resources and tools nowadays).
is that why it looks like a java game from 2006
I never claimed they allocated their resources optimally, just that they have them :-P.