I wouldn't recommend Elder Scrolls games if you want "just the right difficulty"; the series has never been well balanced. The game gives you too many options, and every single main series Elder Scrolls game has at least one major exploit that takes away all the difficulty. Plus, the games aren't heavy on action.

I would again re-iterate my suggestion of the Ys games, as they provide a decent level of challenge if you play on Easy or Normal. (The main difference is that on Normal you actually have to learn the boss's attack patterns, and you will probably die on your first attempt, but the game fortunately lets you retry if you die.)

Alternatively, you could try a pure action game (without RPG elements) such as Freedom Planet.

Note that Elminage Gothic is not like the Gothic games; it isn't even in the same series. I would recommend it if you were looking for a turn based game, like Wizardry, but you're not. (You might want to look into it after you play some of the games recommended in this topic, however.)

Might and Magic 6-8! They're great and many people play the game practically without the tactical mode on, although sometimes it gets useful where you pause it to snipe some enemies from the distance.

Baldur's Gate is also really great, and Morrowind, of course. Any of the Elder Scrolls games.

Edit: Also Arx Fatalix, and I'm not sure if Omikron is action or not, but I heard lot of good things about that game.

Oh! Quest for Glory would fit wonderfully, but it's an adventure RPG, if you don't mind. And the action consists of choosing between different kinds of attack, magic, dodge and shield/throw if you have the latter abilities.

I think Fable 1: The Lost Chapters PC.

Vampire the Masquerade: Bloodlines.

One on Gog I'd say Morrowind.

They arn't classified as isometric ARPG exactly, I don't find those that interesting, but they are action role playing games. Some of the best rpg's I've played.

Again, the Elder Scrolls games are not recommended if you want the games to be "just the right difficulty". Morrowind, in particular, has multiple major exploits that will break the game, making it too easy, and avoiding those exploits while otherwise taking full advantage of what the game offers you is not trivial.

That may be true, but to someone like me, who sucks at pretty much every RPG in existence, that level of "flexibility" in terms of difficulty is extremely welcome. That's why Daggerfall is one of the few games in the genre I ever managed to get somewhat proficient at.

I have to disagree there, especially when it comes to Arena and Daggerfall. Their core gameplay is the combat and the action, and they're built entirely around fighting your way through huge dungeons with hordes of monsters.

a few others not mentioned

http://www.gog.com/game/revenant (more a hack&slash)
http://www.gog.com/game/divine_divinity
http://www.gog.com/game/beyond_divinity (sequel of divine divinity, sure it's not good as the 1st one, but still worth it)
http://www.gog.com/game/heretic_kingdoms_the_inquisition
http://www.gog.com/game/inquisitor

well, pick your poison ;)

If you're not against a JRPG, or at least something with a JRPG flavor, the Ys series are quite good. For a more "traditional" JRPG experience, there's Septerra Core, too.

I find most mods on dungeon siege does not work on steam version, is there a downgrade patch?

Stonekeep, Anvil of Dawn, Eye of the Beholder, Legend of Grimrock. Action RPG first person classic dungeon crawls.

The Steam versions of Dungeon Siege 1+2 are incomplete and that might be the cause of some mods for not working (if they were designed with a specific version of the game in mind). They miss their respective expansions: Legends of Arana and Broken World. Both expansions seems to be caught in a legal entanglement and Square dose squat for offering the complete games. The PSP game DS: Throne of Agony, which was launched as a tie-in between DS2 and its expansion, is in tha same ugly situation.

I'd say that Chris Taylor did squat to maintain his IP's into one place (Supreme Commander 1 ended at Nordic, while the second part at Square..., Space Siege ended at Sega)

From games on GOG - Sacred, Torchlight, Darkstone, Revenant, probably Van Helsing.
Outside GOG: Dungeon Siege (II in particular, Broken World expansion is a must have).

Personally, I'd give Sacred a look. It has some flawed game mechanics, but it is definitely very fun to play and is quite a heartwarming game.
Septerra Core isn't action-based, it is turn-based game. Very good game, it is on sale now, should be in the library of anyone who likes jRPGs (though Septerra Core was made in the West).

Ah, Dungeon Siege. I sunk weeks into that game, despite its glaring flaws. I'd buy that game in a heartbeat if it came out on GOG. Right now, Dungeon Siege, FutureCop: LAPD and NOLF/NOLF 2 are the only reasons why I still keep my old 450 Mhz Power Mac G4 in my gaming room.

The Mount & Blade series would be a good choice in my opinion.

Yep, I regret all the old games I bought there.

I got the physical disk for DS2, but retail died so no physical for Broken world or DS1.

Still I enjoy the Hotfix mod for DS2.