I've been playing Gauntlet: Seven Sorrows lately with my visiting sister. She's a very different personality from me, so it's been interesting to see that she appreciates the wandering hack-and-slash gameplay as much as I do.
Most significantly, it doesn't bother either of us that the degree of challenge doesn't increase as we progress through the levels. What makes the game fun is the non-stop action and personal experimentation in combat (nearly all the skills will work in most situations, so you just use whatever skills most interest you as an individual... and combine them according to personal preference). The game is very short -- easy to finish in a day -- but worth replaying.
It's Diablo-style hack-and-slash gameplay, but it doesn't have near the dynamics of Diablo 2. Of course, it doesn't last nearly as long as that game, but I think it does prove the viability of combat systems focused on exploration, rather than achievement. What we're fighting isn't as important as how we feel like fighting at any given moment.
I flip an enemy into the air, set him ablaze, then turn to sweep my axe through three oncomings foes. Meanwhile, my sister's character nearby is sending enemies in all directions with magical bursts. We're not thinking of goals. We're absorbed in the moment, savoring every kill and eagerly anticipating our next opportunity to let loose a new power.
Seven Sorrows isn't a stellar game. But I see in it a brief glimpse of a phenomenal possibility. Combine a healthy dose of dynamics and customization with dramatically-animated combat in a sandbox, and you've got a game of Diablo's dimensions (sales and lasting appeal).
Titan Quest and similar games are fun, but they fail to match Diablo 2 largely by a lack of personal exploration, as opposed to general exploration. They place a little too much emphasis on the latter, and not enough on the former. Don't just let the player discover static treasures and flat skills. Make the player's choices between treasures and skills, as well as the player's use of them, indicative of the player as an individual person. Let the player interact with the world and gameplay in a way that is personal (and dramatic).
And, when making a sandbox, don't let worries about balance keep you from filling your game with dynamics that interact in unpredictable ways. In a game of this style, the degree and stability of challenge isn't nearly as critical as in other games, because these games are more about the player's designs than yours.