I'm for "limited" XP, or "diminishing return", to use a buzzword. So, decent XP only for the first few encounters of the same type, then tapering down to very few and insignificant XP, to none. It kinda makes sense, and makes grinding useless. Unless you're Asian, in which case you can totally levelup to infinity by grinding mobs that give you 1xp.
After some more thinking and more playing games (the former especially), I feel the need to expand a bit, and possibly take back some of what I said before.
Premise 1: XP sucks as a system, but is necessary to simulate the PC's "growing up" in terms of ability and personal skills.
Premise 2: I'm just dropping a few concepts off the top of my head here, or things I've noticed in games that don't make that much sense to me.
XP works better and makes more sense when "skill-specific". Combat shouldn't share XP with Crafting or Social skills, and using a skill should only advance that specific skill rather than give a "xp voucher" to spend randomly on any skill. I will refer to random, "generic" skill in this reply, without any specific system in mind, but rather with the "typical" stats many RPG just use, (STR/STA/CON/AGI/WIS/etc).
From this standpoint, "general" XP systems become fairly pointless. For example, using a 1-handed axe should increase the axe skill and maybe the strength and stamina stats, possibly agi/dex too, to a lesser extent.
Using said axe to chop wood would increase STR/STA/DEX, along with, say, the "woodchopping" skill (or maybe the generic "woodcrafting" or maybe the "foraging" skills, whatever), while using it VS opponents would increase, as well as those stats mentioned, some specific "Axe-combat" skill. This latter skill would influence to-hit chance, crit chance, and weapon damage. Weapon-inherent damage should only have slight variations: an axe to the head is an axe to the head, no matter if it was some 3rd-hand crud or a shiny new supermegaultrapro axe 2.0.
On top of this, I stand by what I said before. Killing the same enemy over and over again should/could increase, for example, damage or crit chance VS that specific mob, and should still increase the "physical" stats at the same rate (50 axe swings are 50 axe swings, no matter what against). No xp is involved. Swinging weapons at thin air should provide no benefit (not very realistic because it should still provide a small skill increase, but necessary to avoid retarded exploiting a-la Ultima VIII, just to name one).
Killing extremely powerful or renown mobs should provide rewards t the specific skills used to kill the mob, and rather than xp, should reward "fame", which could translate into a bonus to diplomacy or discount, or more girlfriend options in town, whatever rocks your socks. Killing 50000 rats should provide leptospirosis and nothing else.
Now, I'm sorta debated about "weapon skills", as in "special moves". Honestly, I'd be happy to dump them all at once, or at least most of them, and rather work with "stances", which better express one's attitude towards combat. Some fighters are more rushy, some are more cautious, some prefer to attack first, some prefer to defend and only counterattack. Specific "moves" are inherent to one's skill with the specific weapon, and should only appear as visual fx, the more skilled with a specific weapon, the more flashy the combat will look when using that weapon.
On the other hand, some "activable" moves would be surely welcome, eg tripping, bashing, pommelling, sand-in-eyes'ing, etc. These could be in fact be part of a generic "combat" skill that would be increased by, obviously, combat, and would be weapon-independent.
Wounds and the such should definitively reflect on combat performance, too: 50% health/condition should definitively have an impact on the PC's fighting ability. Stamina/endurance should also enter the equation.
I know some games took steps in this direction, in the past, but I can't say any managed to satisfy me 100%. Not sure it's even possible.
Apologies for the randomness of the concepts expressed, it was more of a "stream of conscious" post.