Monster level is determined by two things:
i) Their base level: they can never go below their base level
ii) The average level of your top n (maybe 5?) exploring characters. Those whom are shopkeeping does not count.
iii) Monsters always scale for by a few levels even with the cap intact.
Lets take the first dungeon for example. Your team consist of level 50s.
With caps on, you will see Level 10 slimes. That is because the scaling cap of the dungeon is level 10.
With caps off, you will see level 50 slimes.
However, a good part of the game does not scale well beyond the 'cap'. Therefore, your level 50 characters will most likely make very very short work out of the lv50 slimes. Furthermore, because xp is based on Base Level, those lv50 slimes will still only 1xp per kill.
Because of the above points, I recommend you to leave the cap on. It gives your lower level characters something to do.
Some monsters can scale pretty well esp early in the game, but at the same time, you may have problems with Uya's xformation quest in NG+ if you have not been actively using him. Other quests, such as Mare sister cave you can solo with Wil, and the 2nd guild examination I used a training ring to weaken all the slimes before blowing them up with my underleveled Emelita.
All the old content becomes absolute trivial as soon as you start on NG+ content. Their difficult is no harder than mobs in deadbeat.
A side note: Will will need 500 kills to get his last title. So nuts in NG+ and use him to kill EVERYTHING.
Nothing beside to give the gold scammer bar keep a new look. It does not do anything to the plot or anything, and you can change his look over and over. The same goes for Lily's form (I picked teenage to start with but lately have been liking her adult form a lot).
They are in NG+ (when you start a 2nd game using old save data). You will get them eventually.