I actually made my account primarily to discuss this.
I've played the game on Veteran normally without any scaling options on and the skulls and harder areas were visible.
However the game was becoming laughably easily, so I wanted to try POTD and I enabled level scaling and checked ONLY SCALE UP. Now everything in the game is either at or below my level, according to in game quest difficulty descriptions and no more skulls are present. I'm also actually able to do quests WAY earlier than what I could originally because everything is "scaled" to my level apparently -- even when I clicked scale ONLY UP.
This is definitely a bug or they really screwed up the description.
Scaling enemies up needs to be fixed because even on POTD the game is just too damn easy, especially since resources are basically infinite unlike in the first came. I don't have to worry about my resources at all like I did in the first game which is unfortunate, because I like the new class/multi-class addition very much - but the game is just to damn easy I can spam all my per-rest abilities and not even worry because I can camp right after each fight.