The FATE train...

[Moontide]

Another angle: The more I look at it the more I think that a big part of the core problem lies in the individual mob XP system. As far as I've noticed you get full XP if you tag a monster, and still full XP if you deal enough damage to said monster, also in parties. This heavily favors large-group slaughter mobs who mash down as many weak enemies as possible for maximal XP. Something needs to be done to the group participation XP to actually make beating down tougher enemies a better choice instead. I don't know which way you could actually implement that in a way that'd be both pro-teamplay and making a greater challenge an attractive choice though.

A simple way to deal with mass-participation FATEs would probably be a way that lets the monsters level up while the participant count increases without making the XP rewards greater. That still dodges the issue of how XP is distributed though.

If you don't like fates.... Don't do them.

And, as it stands for leveling speed, intentionally shoot yourself on the foot?

[Elazu]

And, as it stands for leveling speed, intentionally shoot yourself on the foot?

That's SE's fault though. I would love for them to buff dungeon exp to make them viable leveling methods.