Damn, my team got completely wiped out for the first time on 2-8.
Does anyone know if this game allows for grinding i.e. is there a set limit of combat encounters?
You can kind of grind but I don't think it would really make much difference.
When you complete story missions you receive coins depending on the rank you get, and power orbs as well. You use coins to buy weapons and power orbs to advance your skill trees. There are also coins and orbs dotted throughout the world and in chests.
On your first time through a world you can't replay story missions in that world. Once you've completed a world you have two options. One is that you can walk through the world again looking for secrets you missed (you can't access all secrets first time through) and looking for extra challenge missions. You can get more orbs and coins doing these challenge missions. Story missions are disabled in this mode.
You can also choose to replay individual story missions using the rabbids time machine. You can do this to improve your initial rank and you will receive some coins for completing story missions a second time. However the amount of coins you receive for completing a story mission for the second time is a lot lower than your first time through. You also don't receive orbs again.
So, essentially, you can't grind orbs and this is what you need to level up your skills. You can grind coins to a degree, which enables you to buy more weapons, but the weapons you can buy are dictated by how far through the game you are.
So theoretically I guess you could keep replaying old missions until you have enough coins to buy the very best weapons currently available for each member of your team but this would be quite the chore and not really worthwhile.
To put it into perspective I decided to replay 1-7 as I didn't perfect it first time around. I got 200 coins for a perfect rating. The stage of the game I'm at (2-8), each top of the range weapon costs about 800-900 coins. And each character has a primary and secondary weapon.
I'd say just play the story missions, then go back and play the challenge missions and look for secrets, then perfect any story missions for completionists sake. But grinding old story missions for coins is not going to be very fruitful.