I'd like to toss my 2-cents in on this.
The level bonuses stop at Level 20, but I don't see that as a flaw to the game either. I think it helps keep the game power levels in check and does make it challenging. Balrogs are *supposed* to be extremely difficult to kill. As your Bashkar hits level 21+, he should have a lot of other skills that are very high up in rank that will allow him to deal with the Balrog; Two Weapon Combo, Reverse Stroke, Stunned Maneuver, Adrenal moves, Tumble Evade, Tumble Attack, etc. And HOPEFULLY, he knows to parry! Ideally, he would also have other companions there to assist him in the battle. By my estimation, that Balrog should be toast with 3-4 level 21+ PCs attacking it.
You can easily opt to have the level bonus simply NOT stop at level 20, but then you're allowing for over powered PCs while the Creatures don't get the boost. The stats/levels/difficulty of the creatures were created and balanced for RM PCs with level bonuses stopping at level 20. If you give the PCs free level bonuses up and up, what about the creatures? Do you also balance out the game and give the creatures limitless level bonuses as well?
There is another thread that has a lot of good thoughts on the profession bonuses.
http://www.ironcrown.com/ICEforums/index.php?topic=8498.msg108794#msg108794And I know there is at least one more that discusses an option to Skill Rank bonuses beyond the higher levels. 10 ranks at +5, 10 ranks at +2, 10 ranks at +1, 10 ranks at + 1/2. It's very similar to the point you are making here. At higher levels, there are diminishing returns. But at higher levels, you have a lot more skills at very high levels and lots of magic items to supplement those skills.