I can see where you're coming from. I don't like leveling in Adventure of Link at all; I certainly agree with your "it's all one big grind" testament.
However, though I know you kindly told us not to say this, but I do like it because of its challenge. Sure, it makes me want to throw the controller sometimes, but it's a nice departure from the rest of the series. (In all honesty, I still can't figure out why everyone thinks Twilight Princess is hard... I don't find any of its dungeons are overly difficult. It's the easiest Zelda game, but perhaps that's just me...)
Another reason I love that game is simply because of the memories I have of playing it. My sister and I often sit side-by-side and play this game, and we've had plenty of good laughs at one another's failures – and this is coming from someone who's had the game for a year, and hasn't even found the third dungeon yet. I've recently come to the conclusion that I am a very poor video game player – I died 99 times in LttP with a walkthrough. I'm sure you can imagine what that means for AoL. While it's a merciless, grueling experience, the feeling of accomplishment is tremendous. ...Not to mention is gives me more bragging rights, haha.
With the puzzles vs. combat thing... well, since I tend to over-think puzzles (and that's the reason I can claim the title of "awful video gamer"), I think I almost prefer difficult combat, anyway. I like combat-based Zelda games, like Skyward Sword and Oracle of Seasons (although maybe just because I can't beat the puzzle games like OoA). ...Admittedly, OoS and SS were much, much, much easier than Adventure of Link, and they didn't have that frustrating experience system. I still don't like that: it's a major flaw in AoL. I can't deny that.
Adventure of Link is not my favorite game by any means; nope, I agree one hundred percent when you say Legend of Zelda was more enjoyable. But I don't think it's bad at all. I believe it's an acquired taste – it's not for everyone, and it's perfect for some. I'm somewhere in the middle, I think. What I like most about it is that it brings back the exploration that Legend of Zelda had; it's what I liked most about that game, and it's why LoZ is in my top five favorite games. The towns were a fantastic inclusion that would be awesome to see something similar to in future games.