Where is the best place to level up?

Early in the game, I like the swamp near palace 2. Small enemies give you 50 points per screen and every sixth enemy drops either a 50-point bag or a blue potion. Another good spot is the desert north of the graveyard. Big enemies can give you either 64 or 104 points per screen (the blue goriyas are worth either 30 or 50), and I believe the blue goriyas drop 200-point bags or red potions.

Towards the end of the game, the best spot is the forest on the south part of the eastern continent. Small enemies here give you 310 points per screen, big enemies give 220.

By far the best (and cheapest) spot is the fifth palace (island palace). There is a screen where blocks fall from the ceiling and stack up. You can let the blocks stack all the way up and then stand on the third or fourth block high. I prefer the third. There is a certain spot in these blocks where you can stand and the moa on this screen will continuously spawn over and over. He gives you 50 points each time and will drop a 200 point bag or red potion every sixth time you kill it. I prefer standing 3 blocks high and casting Fire. When he spawns, you can jump and shoot the fire at him, then when he flies over you, use upthrust to kill him, and repeat as desired. (I didn't come up with this trick, I think bsulpher did, but I'm not sure, so thanks to whoever figured this out.)