I understand that balancing is a complex problem, but please don't resort to level scaling. When I level up, I like to be able to feel a difference, to feel a sense of progression. Leveling up should feel important. If enemies level up with us, we'll quickly get the "hamster on a wheel" mindset, and won't feel motivated (especially with 70 levels to gain).
With level scaling, I can make the argument that levels shouldn't even exist (other than gradually introducing new skills), and that's an even worse situation.
Honestly, I'm happy with the current system. My suggestion:
1. Keep the original tiered system and adjust for the new expansion. Normal = 1-30, Nightmare = 31-50, Hell = 51-60, Inferno = 61-70, New Difficulty = 71-73
2. Keep the monster power selection.
3. Still allow a player to choose any difficulty, regardless of their progression in earlier difficulty modes. Maybe toss in level requirements for sanity checks, like in Diablo 1.
4. Allow monster power selection (at lower than the level cap) to increase the level of monsters by a certain amount. So, if I like act 2 (for example) and never want to leave it, I can get there in normal mode, crank up monster power until I'm leveled enough for nightmare mode, and skip up to nightmare mode at monster power 0 again.
Unless I'm mistaken, this should allow the same flexibility you're desiring to provide the players, without having to add in something as mind numbing as level scaling.
Even if my idea is horrible, please do something to avoid level scaling. I play RPGs for the sense of progression, and (other than max level playing) this takes it away completely.
Thanks for reading,