I just took my level 17-20 party through Arnika-Trynton Road a bit and I noticed that, for whatever reason, the game was spawning low level enemies. I did earlier get a couple Geomancer encounters (and a ring from one of them), but then the game seemed to just spawn low level enemies.

When fighting them, my spells were doing nice amounts of damage, and the enemies had low hp; often they would all die after 2, or in some cases 1, spell. (One fireball or psionic blast from my Bishop could wipe out all the affected enemies.)

I actually did get something useful out of these easy fights. I saw an encounter with 4 Vampire Bats, and just save/loaded until I got some wings to drop. Now I can get the Vampire Chain.

Sometimes the game does that. I also met common Crabs on Arnika Road at a point where there should be at least Venom or Hardshell Crabs, possibly even Crusher Crabs. The level sensor seems to include lower levels, but with a lower percentage.

It's not just random. Only certain opponents spawn in every area. The kind of opponent is determined by level. Although I am not 100% sure my observations so far only credit a few exceptions:

1) You left low level opponents earlier on and return - they are still there.

2) Some low level monster are supposed to be met on a higher level (the Iron Weeds with company show up even if you have a significantly higher level).

3) Set encounters are independent of level.

4) Finally the most important observation: you can outlevel a whole area. There are no monsters left on the list for your level. Once you hit that point random (?) monsters from that area appear, regardless of level. That does allow to find ingredients for custom pieces for instance.
You'll probably notice quickly. You met nothing but high level opponents all the time yet you level up once more (breaching the threshold) and suddenly you meet very low level monsters. Geomancers may be the highest encounter on Arnika Road's list so it is followed by randoms when levelling past the Geomancer's level range.

That's what I deducted from my findings anyway. Not sure the random monsters are entirely random. There may be more to it - it's not like I'd know how it is coded.

I think it's either Zadok_Allen's #4, or potentially a number overflow issue. Once, when going through the Arnika Road with a level 25ish party, it was populated almost ENTIRELY by Higardi Rousabouts, which I normally only encounter at level 3-5. I've also encountered a lot of low-level (regular) Swallowers in the Southeast Wilderness at very high levels.

So while there is some degree of randomness to the spawning at high levels, at VERY high levels it seems to be weighted toward the lowest-level possible spawns in an area.

My next game I may try to level up to 40 or so and see if I can get different results.

Well, as I said, I once met common Crabs on the sandy area of Arnika Road with a level 18-20 party. I sort of overkilled them expecting Crusher Crabs (the highest level crabs for this area) or at least Hardshell Crabs. So there has to be SOME randomness.

I suppose it's Zadok_Allen's 4th point. The highest level monster on Arnika Road for example are Rank Weeds (level 14 max.), on Arnika-Trynton Road it's lvl 16 Geomancers, lvl 17 Sige Ghosts, and lvl 16 Vampiric Heads (the latter in the graveyard I suppose). So if you're level 20, everything would become random.

For comparision, here a list of the highest level monsters for each area:

Monastery: Flesheater Slime (lvl 16)
Arnika Road: Rank Weed (lvl 14)
Arnika: Savant Minion (lvl 22)
Arnika-Trynton Road: Sige Ghost (lvl 17)
Trynton: SoulDrinker (lvl 20)
The Swamp: Oozite (lvl 22)
Marten's Bluff: Rebel Ghost, Ensnaring Spider (lvl 22)
Mine Tunnels: Contagion Bat (lvl 23)
Northern Wilderness: Adamantium Slime (lvl 24)
Umpani Base Camp: Geomancer (lvl 16)
Mt. Gigas Caves: Contagion Bat (lvl 23)
Water Caves & Bayjin Shallows: Omaga Shark (lvl 23)
Sea Caves: Adamantium Slime (lvl 24)
Bayjin: Plumed Serpent (lvl 25)
SE Wilderness: Plumed Serpent (lvl 25)
Wilderness Clearing: Sulfurous Scorcher (lvl 29)
Mountain Wilderness: Molten Scorcher (lvl 39)
Rapax Rift: Sulfurous Scorcher (lvl 29)
Rapax Castle: Rapax Templar Master (lv 28), Sulfurous Scorcher (lvl 29)
Rapax Away Camp: Templar Knight (lvl 24)
Ascension Peak: ArmeGazer (lvl 50)

Interesting that the area perceived as being the toughest early on (Arnika Road) is outleveled the fastest.

To me, it makes sense that Arnika Road would be designed as a low level area, because that area is encountered early in the game.

Of course, here's an interesting question: If the ArmeGazer were added to the Arnika Road list, and no other changes were made, what would happen?

I think I'll check out Arnika Road on my current file and see what appears there.

Edit: Enemies on Arnika Road include some lower level ones. I encountered some bats that were level 2 and had single digit HP. (I believe Fireball at Power 1 was enough to wipe them out.) Highest level was level 9 and was one of those Higardi types.

That's one helpful list!
There is more to it as far as encounters go however. You are not supposed to meet equal level opponents! Some monsters will always be ahead in levels. If you reach their level you may already have outlevelled that encounter, meeting something else. That's mostly the "one big bad guy" type of encounter. The "myriads of small fries" encounters on the other hand have their monster levels comparatively low. Actually equal levels are usually met at some point but small fries may be equal from the start and fall behind until they expire while big guys start ahead until you equal out.
I'd conclude: there is a monster level and an "encounter level" or rather "encounter level range", which is used to determine your encounters.

Say kn1tt3r: could you tell me where to find the complete lists for each area?

I got the info out of the Cosmic Forge Editor. Just check the Monster/Random Encounter lists in the location editor.

Never used that - good to know.
Thanks kn1tt3r!