I am torn on this. On one hand, you have high-level creatures with the ability to fire off multiple dispels per day. Especially for a buffed PC party, this is a clumsy mechanic (don't even get me started about buffing; I'll spend all day whining about the good ole days where I didn't have to track 15 bonus types). Furthermore, this is an irresistible option for any creature with an innate ability to DMag in high-level encounters. I'm not sure how often this occurs, but in our AoW campaign, we have run across it several times. It's quite time consuming determining who cast each buff (we have 4 casters capable of buffing in our party of 5), ordering them for the dispel, and adjudicating the results.
OTOH, this spell is already used only sparingly (in my limited experience) by PC casters, and weakening the area dispel seems to really limit the usefulness of this abjuration. When we do use it, it's generally to affect one spell, like a confusion, etc. cast upon one of our PC's.
Is there a way to make the targeted dispel a little better in a combat situation as a trade off for removing the area dispel from those same situations that doesn't obliterate the holy grail of game balance?
Just some ideas off the top of my head:
--a targeted dispel is enhanced slightly by a duration (maybe a duration of 1r/5 caster levels. During each round the DMag is active the caster can target another magical effect or the same effect again, once per round as a standard action), or with a formula tweak on the opposed dispel check to make it easier to dispel?
In general, I like the idea of giving some power to DMag in higher levels, because it is already gimp'ed by the +10 cap.