Yeah, actually, that sort of "f*** it" moment is what I look forward to. It's true that a party might get frustrated and then decide to just level up to take the edge off of a particularly difficult battle. But there's something (like you said) that is really satisfying about beating an opponent on pure teamwork, strategy, communication, and knowledge of the game and your fellow adventurers (the Bio effect KO'ing the mob sounds pretty awesome, if I'm reading you correctly.)
It's pretty easy to just take on a dungeon over and over after failing and getting stronger stats-wise just by leveling. If you didn't have problems beating pre-NM/event mobs on the way to the NM, then you probably won't have much trouble the second and third times. But it'll get easier just by getting stronger in levels. The problem I see with that is that you're not necessarily having to rely on teamwork aspects when you begin to gain levels incidentally after several tries.
Having an optional level cap lets anyone enjoy that challenge in whichever way they choose.
If you want to repeat it (and it's repeatable), you could get it out of the way for the rewards or the story, and then take some newer players into it later and enjoy the challenge with them as they learn the basics of the game.
If you want to challenge it and beat it on pure acumen and teamwork alone, then you can do that as well with an optional cap, and then repeat it with the cap off once you had the satisfaction of taking on a challenge and beating it with your comrades.
You wouldn't have to wait until endgame-ish sorts of scenarios where you need a level 99 job with really nice abilities and gear to stand a chance to have that sort of experience.