One important thing to consider for a game of this nature is how to handle the progression. We are going to be able to level up, which means our combat abilities will be increasing over time, through a combination of better equipment, increased skills, etc. As such, there needs to be increasingly difficult challenges you can overcome, such as stronger enemies to fight.
The question is, how are these two elements balanced against each other? The simplest method is a flat progression, where your power does not increase (at least not much), and the challenges are constant. This is relatively boring, and not in the intended design of this game.
In a more traditional RPG, the advancement through the plot governs the increase in challenge. This involves reaching new areas for the most part, or at least stronger enemies appearing as the plot goes on. A well-balanced one will naturally have the difficulty of the enemies and your own power increasing in tandem. This often features the ability to go to older areas and face weaker enemies again, thus affirming your power increase, or features larger groups of old enemies for a similar effect.
This type of model can be reproduced in a game like VQ by generating regional difficulty. There is no plot to drive advancement, but different regions can have different innate difficulties. Your starting area may be peaceful, with minor animals and the occasional bandit to worry about, while going to the swamp will feature more poisonous things and larger animals, then progressing to the mountains will have cave trolls and giants, leading you to the caves which are dark, hazardous, and full of terrors, before being led to the volcano where the very environment is a hazard and firey beasts threaten you at every turn. Just as an example progression. The more dangerous areas can contain grander rewards, to encourage you to explore them, and those rewards can be different between areas of the same danger level, to encourage you to explore many regions. Many areas could be of the same general difficulty, giving the player freedom to choose how to explore, while still having a structure to play in and a clear sense of progression.
Another option is enemy scaling, a tactic which the elder scrolls likes to use. The advantage is the player has the greatest freedom to explore anywhere, and you can actively maintain the proper difficulty. The disadvantages are that you feel like you are on a treadmill. You gain power, but so does every 2-bit bandit. The forests once populated by wolves are now full of saber tooth tigers. It can feel absurd and unsatisfying, and the sense of progression is greatly reduced. Additionally, if the challenge you provide the player is incorrect, they have no natural way of compensating. They can't retreat back to easier areas until they are ready, as there are no easy areas. They can't push onwards to fresh challenges, as nothing is even more challenging.
A hybrid approach is region scaling, based on what skill level you are when you find the area. This can be bounded. For instance, say the swamp is a difficulty 1-10, the mountain is 5-20, and a volcano is 15-30. If I walk into a swamp at level 3, it is a level 3 swamp with appropriate challenges (which will probably be a bit higher than me to be difficult at first, but I will be able to level up to handle it and be above it by the time I am done), then hit a volcano at 5 it is still a level 15 volcano and I am not ready yet, so I go to the mountains at level 5 which becomes a level 5 mountain, where I spend my time till I can handle the volcano. Then when I am level 20 I come across another swamp, and its only a difficulty 10 swamp because swamps aren't that hard.
Going back through old sections will generally be easy, which makes backtracking easier helps you feel a sense of growth, but to keep things interesting there could still be greater challenges- maybe a large group of bandits will strike, and even though they individually are easy now the greater number presents a new challenge. Or human opponents, which are mobile, can be present to be a challenge.
You can also do regional power increases as well. I don't know of anything that has used this, and it would requires some careful planning, but here is one way it could work. Each region features a common theme, like fire damage, or poison. All defenses against that are located within the region. For instance, you need to get fire crystals from the volcano to defend against the fire damage volcano enemies deal. When you go into a region, you lack the defenses for it, and it is hard. As you progress through it, you collect those defenses, and your power increases for that region, letting you progress without making you too powerful for other regions. This design would require a more sophisticated approach to work well, but that is the general gist of it.
Another option is complete grab-bag. This is the simplest, most naive way to have a progression. Everything is everywhere with no guidance as to what is a proper challenge. You walk through the starting woods, and there is a dragon next to a wolf. Any aggressive moves you make must be carefully considered so you don't get in over your head. rewards are still tied to the difficulty of the monster, so an expert warrior won't waste their time with wolves but the beginner hunter may find them a perfectly good source of resources. Offered quests will have a reward of proper compensation for the challenges faced. The expert warrior wont' take a 10gp quest to kill the rats in the basement, and a beginner hunter can't kill the dragon with the 1,000,000gp bounty. The main factor as to whether this strategy can work is how capable the players can be at avoiding things they can't handle. If they can go "oh, that is a bear up ahead, I better avoid it", then having a bear wander around before they can handle a bear is ok. If they can go "oh @#$%, a dragon spotted me, run", then actually escape the dragon, then having that encounter can work out. If the dragon sees the level 1 guy and thinks "he has no gold, why should I bother", it can be fine, though this is generally hard to justify. It is when the beginning character is strolling through the woods and just randomly comes across a dragon who eats them that problems arise. Other issues are having high level enemies being sparse enough for low level characters to avoid while being dense enough for high level characters to find interesting.
Humans can be more interesting in this scheme, as you can have an entire city of high level characters and its not a problem as long as the player has enough sense to behave themselves- and if they do get caught doing something and have to deal with an entire city of badasses coming down on them, its their own fault. Low level bandits can realize that you are too badass too attack, and high level ones can realize you are not worth their time.
Any other ideas?