First, you need an item (weapon, clothing or armor) that permanently increases a given skill (the amount is irrelevant), that skill is then fair game to be decreased as much as you'd like at level-up, and can be increased back through grinding (and decreased again at level-up).

Items like this are usually called something like "Cape of Assured Golden Wisdom" or "Iron Axe of Deep Biting".

Needless to say, you want this to be skills you don't actually use in combat and/or skills that can easily be increased back so you don't spend hours grinding them. So don't do this for Long Blade if you main a melee sword-wielder or Destruction if you main a mage! The best skills IMO are Jumping and Swimming, but more on that in the next section.

Here's a step-by-step example of how this is done and just how many points you can get from this.

1. Play through the level normally, and just before you enter the portal to end the level, save the game (I recommend a different slot), and equip any and all items that modify skills (again, the amount boosted is not important). Then, at level up, you can freely decrease those same skills to gain a massive amount of points. Here's a save just before the end portal of Level 3.



2. Here's an example of a skill increase item. My cursor is on the Silver Cuirass of Assured Leaping. This increases my Jumping skill by 10, and I will be decreasing Jumping at level up to get a ton of points. I will then increase it back to do it again going into level 4.



3. Press the Character Sheet key (default: F9). The red arrow points to my Jumping level, now in green. I also have some other items equipped that increase my Thaumaturgy and Mysticism (yellow arrows), just to squeeze out some additional points. I'm a melee and arrows character, so magic skills are useless to me. All the skills in green (i.e. the ones I'm wearing boost items for) can be "milked" for points at level-up. Remember (or jot down) which these are, because they won't be marked green when you enter the level-up screen!



4. Once you're sure you've done as much grinding as you can be bothered in the skills that you intend to decrease, and have equipped all the skill-increase items you can, save the game and run into the portal. You will be greeted with the level-up screen. Note that the skills you can decrease aren't shown as green anymore. Also note that the numbers displayed are the base numbers, not the increased numbers. So even though my Jumping showed 95 before, it's now ignoring the Cuirass and is showing the base 85.
You get 1100 points for completing level 3. Not bad, but we can do better. A LOT better.



5. Start decreasing all the skills that you have "increase skill" items for. Decrease them as much as you like. DO NOT decrease a skill to 0, this will cause crashing and instability. Lastly, do keep some things in mind:

• you cannot increase a skill beyond its governing attribute. For example, Jumping is governed by Speed (SPD), so if your SPD is 50, you can't increase jumping over 50. You can, however, use the extra points to powerlevel SPD and get more points on the next level-up.
  
• some items in this game are guaranteed drops, some are guaranteed by enchantment (for example, there's an item in level 1 that is always "of Magica Resartus", but what it actually is - arm bands, pants, cape - changes each playthrough), but most loot is random. This means that you may end up playing the entire game without finding a single Jumping item, or Swimming item, but get a ton of others. If you get an item that increases Jumping or Swimming, SAVE IMMEDIATELY (more on that in the next section).

So, here's my level-up screen after decreasing jumping:


We went from 1100 points, to 4031 points by decreasing Jumping from 85 to 1. Not bad! You can now increase a skill you have at 1 to 85 for no cost, greatly increase an attribute, your choice. Note that had I also decreased my other skills, I would end up with well over 5000 points.

That's the gist of it.

If you want to find out which skills are worth grinding for more points (or which skills aren't) and how to actually build your character to anticipate this trick and maximize your points, read sections 2 and 3. Otherwise, thanks for reading and enjoy your beefed up Battlespire character!

This section provides a few observations and additional tips for getting the most out of this trick.

First off, you can recognize items that increase skills by name. The generic template is

<Item type> of <magnitude prefix> <skill description>.


For example, you can find a Cape of Masterful Red Wisdom in one of the riddle coffins in Level 3. "Masterful" means it increases the skill by +15 (again, irrelevant for our purposes), "Red Wisdom" means it increases Destruction magic.
If you're not sure which skill an item increases, save your game, equip the item and hit F9 to check which skill it increased (it is marked in green text), or check this page: https://en.uesp.net/wiki/Battlespire:Enchantments.

The reason the amount of points an item adds is irrelevant is because the amount of points you get to decrease depends on your BASE skill level, NOT the modified one while the item is equipped. So for example, if your Destruction is 30, and you equip the cape from above, you will be able to decrease Destruction to 1 from 30, NOT 45. You can, however, cast single-target at range Destruction spells to your heart's content to increase Destruction and gain more points.

• Which skills are worth grinding?

Grinding is tedious, there's no two ways around it. Hands-down the best skills you can use for this trick are Swimming and Jumping, because they are easy to grind back and use repeatedly to get a lot of skill increases in a short time, and a lot of points as a result.

Luckily, Lord Methat's Steel Pauldron is a guaranteed item that drops from a boss in the first level, and which increases Swimming, so the game has you covered there. DON'T GIVE IT to the wizard NPC on lvl 1. The staff you get in return is neat, but nowhere near as useful as a swimming skill boost.
If you find an item that is "of ______ LEAPING", or if you gave Methat's Pauldrons away, "of (the) SWIMMER", save your game IMMEDIATELY. Naturally, you want to allow your character Steel armor so you can wear the item in the first place.

Below is a tiered list of skills that maximize the points you get each level-up by spending as little time and energy as possible.

• BEST (no effort): Swimming (END) - Lord Methats Steel Pauldron, items with "of ____ (the) Swimmer"
  Swimming increases passively even if you're just floating on the surface of the water - you don't even need to press a single key to move. Moving around also does NOT increase the speed of leveling. It takes 12 seconds of idle floating to level Swimming from 14 to 15, for example. So if you equip Lord Methats' Steel Pauldron, you can just plop your character in some water and go watch TV or run some errands while Swimming keeps leveling. It does take a while to max out, but it requires absolutely zero input and no special conditions (other than a body of water). Governed by Endurance, so max that out when making your character or level as fast as possible for max gains.
  
• BEST: Jumping (SPD) - items with "of ________ Leaping"
  Jumping requires input, but also levels fairly quickly. Just spam the jump key (mine is bound to Spacebar). If you can find a low door or a slope or some stairs to go under (there is a slope at the beginning of level 3, for example), you can spam the jump key and increase jump super quickly. If you're feeling extra cheaty, you can download Easy Auto Clicker, bind Jump to Mouse 1, slam your character under a slope and start the clicker. Governed by Speed, so max that out when making your character or level as fast as possible for max gains.
  
• BEST (passive): Thaumaturgy (WIL) - items with "of __________ UNSEEN Wisdom"
  Thaumaturgy increases every time you consume a Sigil, and if you've played Battlespire for any amount of time, you will know Sigils drop all the time from all kinds of enemies. You probably won't get a ton of points this way, but if you have low Thaumaturgy to start with, just using one or two Sigils will increase your level. Just pop a Sigil everytime one drops. Don't worry about accidentally consuming Sigils of Entry, those cannot be consumed. You can activate multiple Sigils one after the other - just do it from the inventory and your Thaumaturgy should increase if you pop a lot of them at once (even if the game tells you "You can't cast spells while in ethereal form").
  
• DOABLE: magic schools (various, INT/WIL/PER) - items with "of _______ <various> Wisdom"
  Grinding magic isn't very time-effective because A) your max magicka pool determines how many you can spam before you need to quaff a potion (thus wasting resources) or use a regenerating Magicka crystal, which respawn every minute. So you might end up casting 3-4 spells then waiting 60 seconds before you can cast 3-4 more spells (you can, of course, jump in the meantime to pass the time). YMMV on magic grinding. If you make a magic-based character with Spell Points = 3.0xINT, and you already have some magic skill, go for it. But know that if you decrease a magic skill to 1, it will take a long time to get back up.
  
• DOABLE (passive): Stealth (AGI) - items with "of ___________ Stalking"
  Stealth is a skill you can also increase passively by just hitting the Stealth key and moving around. Stealth is a toggle in Battlespire so there's no need to hold the key (like vanilla Morrowind). Despite the manual stating that Stealth checks are required to increase the skill, Battlespire has a very "it's a covert op if there are no witnesses left alive" approach - namely, Stealth checks against nothing count as "successful", so you can just Stealth around a cleared map before completing the level. Unlike Swimming, however, you do need to actually move around to increase the skill, and moving in Stealth is painfully slow, making Stealth very tedious to grind. However, there are two spinning platforms near the end of Level 3 (you can't miss them) which you can use to auto-level Stealth. Just plop your character on the spinning disc and hit Stealth, then come back. The only issue is, as mentioned, that this takes a long time, even longer than Swimming, and this is the only place you can do it 100% passively: for example, it takes 90 seconds to increase Stealth from 25 to 26, and then 5 seconds more for each skill increase (meaning it quickly takes upwards of 2 minutes of doing nothing or crawling around slowly for one point). My advice? If you find an "of Stalking" item in levels 1-3, I'd save it and take advantage of this trick once, in level 3, for a one-time boost after level 3 and not bother with it further.
  
• WORST: all combat skills (Long Blade, Short Blade, Axe, Blunt Weapon, Dodging, Critical Strike, Backstabbing, Missile).
  Combat skills aren't worth the trouble, because only successful hits level them up. Flailing your weapon around does nothing, and Critical Strike is kind of broken in this game anyway. Missile, however (bows/crossbows and arrows), does level regardless of hitting or missing, but shooting arrows at nothing is a HUGE waste of resources (as you can only recover arrows from corpses). At some point, you will have probably killed all the enemies in the level, so there's nothing left to practice on. Besides, melee in this game is just way more effective than magic, so you'd ideally want to rely on melee to actually kill things.
  There is, however, a certain Scamp on level 5 (and two more in level 6) that has upwards of 10000 hit points, but is otherwise a normal Scamp. If you find an item with a combat skill you don't use (for example, I found a pauldron that increases Hand-to-Hand), save it until level 5 and let that poor sucker have it for as long as you can muster (or until you eventually kill it), and add some points from combat skills as well.

Here are a few tips to maximize the benefits of this trick right from the get-go.

This may be obvious, but make sure you actually select Swimming or Jumping (the two best skills for this trick) at character creation. You can't grind a skill that's not even in your skill list!

Lord Methat's Steel Pauldron is, logically, a piece of Steel armor. So allow your character to wear Steel armor. Remember that Battlespire's character creator displays the MAXIMUM material you can use, so if you set your "Forbidden materials" to Steel, you will ONLY be able to wear Steel and nothing BETTER, and Steel is the 2nd worst material (worst being Iron).

Like in other Elder Scrolls games, selecting a skill as "major" or "minor" means they level up faster. Choosing Jumping and Swimming as a minor (or even major) skill cuts down the time needed to grind them back, to an extent.

As stated at the beginning of this guide, you can't raise a skill beyond its governing attribute. On the flip side, you can't reduce a skill lower than its governing attribute either. This can be bypassed, however, Simply reduce the attribute governing the skills to 10 before selecting the skills themselves in the creator, then you can freely reduce the selected skills all the way to 5.
For example, if you build a melee character, you can dump WIL to 10, select Alteration, Destruction and Thaumaturgy, reduce them to 5, and allocate the extra points into more wounds or higher STR/AGI or combat skills. Where you put the skill doesn't matter - you can anticipate what you will be grinding and put that into minor or even major skills. For example, Swimming and Thaumaturgy as minor skills aren't a bad idea.
However, do keep in mind that this trick only bypasses downward requirements at creation, not during gameplay, meaning you still won't be able to increase any skill whose governing attribute is 10 past 10, even if it's already higher. For example, I had Critical Strike at 65 and Int at 10 using this trick - I couldn't increase Crit or any Int magic school at all.

If you intend to grind magic schools, 3.0xINT spell points makes sense. Regen SP is slow (it takes around 20 minutes to fully regenerate around 200 SP), so it's not worth the point cost at creation - spend that on more Wounds instead. But if you do intend to camp around a SP regenerate gem, it makes sense to maximize the amount of spells you can cast before needing a refill.

Most of the info in this guide was collated from various entries on the page below. Many thanks to the fine folks at the UESP Wiki for maintaining this massive repository on all things Elder Scrolls.
https://en.uesp.net/wiki/Battlespire:Battlespire

Grind testing was done by me (i.e. can you level Swimming passively, does missing arrows count etc.). Feel free to share these tips, no need to credit me.

Feel free to add more tips in the comments!

Thanks for reading this guide and I hope it made your stay in the Battlespire a little more bearable!