So first of all, thanks for the feedback! While I like hearing what people like, hearing what they DON'T is also important. May not always result in a change for a variety of reasons, but I at least want to be aware of what is and isn't working for people.
Second, there are a few different things that are getting entangled here:
1. During the normal, initial playthrough of the entertainment districts, the enemies have a daze move they can use on you. This immobilizes Mezz for a few turns and lets them get his submission up easily. This ability exists for a reason: without it, it's actually fairly easy to steamroll the early enemies if you're careful, even without using the charm. I felt the gameplay needed a little more unpredictability, because TOO much power or agency in combat in these games makes them boring; there has to be some risk, something keeping you on your toes. That said, I've done my best to make sure the enemies don't spam this ability, via a bunch of manual checks, both to make sure it DOES show up every so often, but also that it doesn't get overused. That said, RPGMaker's RNG is...odd sometimes, so you will get some weird lineups every once in a while.
2. If you lose 3 times to the mobs, you then go into a different stealth gameplay mode in that section. The daze attack is no longer a factor, because you don't enter combat. In this mode, the enemies are on set paths to facilitate sneaking past them, rather than their random movements in the normal mode.
With all that said, it is still somewhat possible to avoid SOME of the enemies in the normal mode, and you certainly don't need to fight all of them to progress. But yes, in normal mode you do end up fighting most of them. The stealth aspect is more in that particular mode.
And yes, the main purpose of the special attack is crowd control, and you'll mostly need it for that last gauntlet. It IS possible to get through without using special there, but pretty hard as you'd imagine. But yes, overall I'd definitely recommend avoiding fights if you can. Cruel Serenade is far from a survival horror, but it is a bit stingy with items, and those that are given are provisioned in order to get you to your goal, not to defeat every mob on the map. So in that sense even the normal gameplay is a little "stealth": you're trying to avoid conflict if you can, because you're always just a little (sometimes a lot) behind the 8-ball.