Leatherhead
Possibly a Idiot.
I don't think there is a simple solution. I think it's a matter of going for a solution which minimizes the chance of the outcome that you like the least (invincible-seeming PCs, high PC mortality rates, grind, or disparity between PCs and monsters).
Higher hp and guaranteed damage ends up devolving into an HP roller coaster. And like a real roller coaster, riding one isn't likely to kill you. When the players start figuring that out, then the grind starts in.
What I would like to see (at least for a trial period), is a return of the condition track (in a fashion) and have manipulation of "the tide of battle" to be the stress between the rocket tags.