First off, Phantasmagoria. It was a ride.
Whilst I overall really liked the game there were quite a few things that broke balancing quite a lot.
First off, some of the quests to acquire new forms were quite hard, probably due to chosen difficulty, however:
You start on lvl 1 for each form you acquire. This is not the issue.
The Problem is that, at least on hard (I haven't tested on others), you can only really defeat groups of 1 enemy at a time.
2 is a really hard time if you're prepared and 3 is nearly impossible.
This made defeating the bosses for that transformation quite difficult for some forms.
The ones I had the most problems with were:
The wolf boss and survival challenge (Through you can simply run away during the survival challenge but might as well fight when you can easily heal)
And the Manticore level (The robots are a tough fight even if they are alone. I'm sure I got one-cycled by them more than once)
A possible fix would be reducing the chance for multiple enemies to appear during Form-Acquisition.
You could also look at the sewer-quest, which was quite alright, even through the boss took a few tries.
On the other hand there are some attack combos that made it trivial to steamroll most enemy groups in human form:
Acquire Mouse and Salamander
Learn "Grazeful Vulpine Movement"(Fox) (damage all), "High Alert"(Fox)(evade all),
"Can't catch me!"(mouse)(evade all)
"Draconic Strike"(probalby bugged, I think it casts a hit all attack as well)(salamander)
"Dragon Vein"(salamander) (attack up)
Cast "Dragon Vein", "High Alert", "Draconic Strike" and weapon damage skill of your choice
Most enemies will be dead or close to it by now.
You still have "Can't catch me!", "Grazeful Vulpine Movement" and probably a high damage single target spell to finish off most encounters on hard without even taking a single point of damage.
In the worst case Scenario you can then transform into fox and get another round without damage and another hit-all attack.
Salamander can easily be acquired by engaging an enemy in the desert, casting "Spiritual Boarder"(doesn't use turn) and\or "climax" (skips enemy turn if I recall correctly), then running away.
Once I acquired the form the fights were quite easy (as mentioned above I played on hard, I think they were balanced quite alright if you don't compare them to the PAIN of the other encounters [I am looking at you manticore]).
Overall this makes getting a rather good form (at least in my opinion) easier than it was likely intended to be.
Sadly I don't think there is much one could do to prevent this.
Maybe making one walk a little bit slower so you can't keep your HP topped up as easily on lower levels (since it takes you longer to reach them)
or adding something that makes desert exploration harder until a perquisite like another form or item are acquired
"Phantasm Barrier" can also easily be abused against enemies that hit only once (since you can just spam "Herbs", which are quite abundant, until a good healing option like "climax" is off cool-down. Early game this isn't a problem since "Herbs" are still somewhat limited, but later you have more than enough of them.
A fix you could try is setting the activation threshold to 15% of maxHp or something. (Still plenty against strong hits, but you can't keep blocking attacks whilst waiting for your skills to go off cool-down)
Finally the fights to upgrade the forms were way easier than acquiring them, partially due to having a full team with you.
All in all a fun game I enjoined quite a lot (through getting one-hitted on hard all the time was somewhat frustrating). I quite enjoyed the endings in the demo (I've found Fox, Kitsune, Rabbit, Mouse and Golden retriever, through Fox took me way too long considering I found Kitsune quite quickly and way earlier).
The artwork was decent as well, so I am quite looking forward to the next version.
I am currently playing through the game again (for some reason on hard, again, through I am planning on doing a normal run afterwards to see how well that is balanced [hard usually isn't the main focus of balancing after all]) and would be happy to give some more insights into my experiences if I find something else noteworthy. I'm also happy to answer further questions about the feeling of certain encounter (like mimics without signs. They're tough on hard) or other topics related to the experience.
Best of luck with further development efforts.