It's probably best this game stays focused on collectibles to unlock those things you mentioned. In this sort of game you *typically* grow stronger, i.e. "level up," by exploring. In Yooka combat moves can be purchased from Trowser with the Quills you find, Playtonics you purchase will likely yield the "optional" Cheato code / Stop N' Swap style modifiers you mention.
Now many modern games do use EXP effectively (as you may know better than me, actually...)
In Yooka such a system could reinforce the combo system and encourage the player to string together a variety of combat moves. However my concern is that this would feel convoluted with the upgrade systems in place and detract from the exploration-focused gameplay. If players enjoy the feel of the combat moves and the look of how they animate, they'll naturally want to experiment with the system and gamemplay becomes its own reward.
P.S.: The new Rachet and Clank uses exp, right? Platformer aside, this seems a more action oriented game but as I, unfortunately, haven't played others could likely better speak to this.