Does Kratos' total level matter?

Are enemy health bars and levels based on your own?
No they are not. Enemies have a set level, regardless of the difficulty. Between Balanced and Give me a story at least. The colour of their health bar represents the difference in level between your gear level and theirs. Purple being the hardest, through orange and yellow to green which is the easiest. If you were gear level 4 a level 7 enemy would have a purple health bar.

Does gear level mean anything?
Yes it does. This represents the strength of Kratos. Higher level gear will provide larger stat bonuses and thus make your character stronger. This is how you progress your characters strength in the game.

Bonuses or penalties for distant level enemies
Needless to say, lower level enemies are easier and higher are much harder. It's not uncommon to run into a purple bar enemy a few levels higher than you in a side quest who will kill you with one hit. I am unsure of the impact on earned experience with killing enemies higher or lower level than you.

Gear stats
The stats on gear will get better with higher level and higher rarity gear. Green is common, Blue is Rare, Purple is Legendary and Gold is Epic. Generally I've found that higher rarity gear drops with a better base level and with much higher stats. This allows you to upgrade it much further.

Focus on stats or gear?
Focus on gear. This is the primary driver for progressing the strength of Kratos. Different gear sets focus on different stat combinations. So the style of gear you pick will depend on your playstyle.

How do I get more gear recipes?
The items to craft are unlocked when you first encounter an ingredient required to make an item. As you play and explore, ingredients will become available and shops will offer new items, even if you don't have all the ingredients required to craft the item.