ToME: the Tales of Maj'Eyal

Are monster levels determined in relation to character level when you enter a dungeon for the first time, and then locked at that level if you leave and come back at a later time? Is there any sort of a cap on the levels based on location? How are monster levels determined?

I tried searching the forum for quite a while and couldn't get an answer...

Yes, yes and yes. Monster level is determined when you enter the first time (except some dungeons that regenerate with second bosses, those get reset when you enter again after meeting certain conditions) and stays that way forever. This is also item level I believe. There is some minimum/maximum level associated with each dungeon as well.