The things you mention are all valid points, however I don't think they are the reason for the changes in the level drain system.
Regarding the "crippling" part you mentioned, I point out that in all of 62studio games there are plenty of items that gives you bonus levels, making it much easier to be over leveled in any point of the game (I don't remember if those items are also in Lust Friend but you get the point).
Also, I think it is more frustrating to get an unavoidable level drain at high Lust level that refills the enemy's health completely (see Lust grimm again, demon in wonderland), rather than getting a random level drain from an enemy during battle in Lust grimm (not to mention that in Lust grimm most of level drains happen during an Hold, which you can break free from quite easily, and even then the level drain does not completely refill their health).
As you said, the fact that the most recent 62studio games focus more on the dialog aspect rather than combat, probably encourages ending the battle that way rather than with defeating the enemy but I believe both options should be viable for a good game design.
As you mentioned, the system might have been modified mostly for semplification purposes from the devs, however I also still think that the change of rpg maker versions impacted the most in the change in game design