Maybe? Some have said that inventive sneakiness around the obstacles to XP is a good and desirable thing in a sandbox game.
Maybe. I think there are two types of sandbox games: googlyblits, where the goal is to explore the world; and sandoolepip, where the goal is to challenge the players.
I have never been able to grasp googly play (except the genre-emulation kind), so I'm focused on creating a sandbox in order to challenge the players.
edit: edited for rounser.

I think my meaning is still clear, though.
If the "smart choice" is to farm XP from low-level encounters, that ruins the risk-reward that I want to see. It's a winning solution that ruins the game (like tic-tac-toe).
So yea, it's an easy way to make a small living going after little isolated bands of kobolds, but they'd grow very weary of this and band together. The big kobold chieftan of the region could also put together a bad ass hunting party to fix their little problem. That little snipe hunt of the PC's could quickly turn on them if those hired hunters show up.
I see where you're going, but I don't want to make things tougher just because the PCs are higher level. If those kobolds would join togther, PCs level 1 or level 10, then they would.
The challenge comes in for low-level PCs who want to make sure they don't unite! But the high-level PCs, who just want to wrap up a loose end, they're forced to run through long combats where the outcome isn't in doubt.
Yeah, maybe a skill challenge could work, as could pressure on extended rests. I'm not sure how I will deal with it, when and if I get to that point. I'd like to hear experiences from people who have dealt with this.