It seems like the only thing it affected was the choice of spells (which I didn't use anyway, since it seemed more efficient to just hoard gold and buy the best items).  
magic is useful and actually has some stratagy involved, water element can cast water shield that reduces the damage you take temporarily which is very useful, you can also use it in succession and with gray potions to boost your defense untill you take no damage at all, this stratagy is good for the later enemies. also spells are typically stronger and never miss, and increaseing your magic by one point goes further than raiseing your strength one point sinse magic power is multiplied depending on the spell you cast, the balance is it uses pressious MP that can only be restored by potions or waiting in the rest area
