Do damage spells suddenly become less effective in the late game?
No, but the game does match you with enemies that make most every fight a challenge...there is no god-like destruction going on at high levels unless you trek back to lower level areas.
But do I need the guards to ever like me again for any reason? If not i'm gonna plunder the entire city before I move on.
If it does not interfere with your faction ratings with the merchants themselves, plunder away. These guys DO come in handy as allies in some of the fights you will encounter as the game progresses, esp since the savants creatures gain strength as you do as do the Higardi rogue-types that sometimes meet up with you in town. Just don't expect too much out of them once you start fighting slashers.
The gnome women in this game are butt ugly!
Gnomes ARE butt ugly. There are no plastic surgeons on Arnika willing to undertake the first look in order to make anything better of it.
My suggestion here is to realize that true beauty comes from the
inside.
Enjoy your game!