I levitated across a cliff (had to use two scrolls) to be rewarded with a 'fine sword,' which was better than the sharp sword I'd made. This is great, as I'd been using the sharp sword for the last 5 levels (was level 12). Five minutes later, I encountered a pack of 6 wolves and 3 black wolves, killed them, leveled up, and now am using my the evil bastard sword, which is much more powerful.
No.
You die a great deal. When you level up, you die a bit less.