Both the Backtracker trait and the additional stress penalty refer to walking backwards within a hallway after having walked forward. I couldn't find an official source for this, but it's relatively easy to verify manually that walking backwards through an entire area causes more stress than exiting, reentering, and walking forwards in the opposite direction. (If you want to verify this, I recommend using throwaway characters)
For the medium tier bosses, It's certainly possible to take down the Necromancer and the Swine with level 3 or a 3/4 mix. I personally wouldn't fight the Hag until level 4.
Some of the preparation steps require a lot of money and weeks in town to fully complete, so you can go with them partially done. It's a risk/reward decision you need to balance.
1) Use a Vestal!
The Vestal's party heal will save your bacon so many times in boss fights it's not even funny. It's a very efficient heal in terms of raw numbers, and your party can frequently survive for an amazingly long time at low HP as long as you can clear Deathblow status quickly.
2) Have maximum skill and weapon/armor levels for your characters.
This is a pain in the butt due to the number of relics it takes to upgrade your buildings sufficiently, but a resolve 3 character with maximum skill and weapon/armor upgrades be more effective by far than a level 4 character with few upgrades.
3) Get rid of the really horrible negative traits and diseases.
The more negatives you can clear from your characters, the better they will be. Ignore small problems if you can, though. It will take a loooooong time to clear out all the crap they've picked up to this point.
4) Don't be afraid to bravely run awayyyyyy before the boss.
Give the dungeon and see how it goes. Ideally, you will be able to save your campfire for the last room before the boss so you can start the fight with high HP and low stress. If you are in bad shape, get as much loot as you can safely and then exit the dungeon. The stress penalty for leaving is much better than a total party kill.
Finally, remember that if someone is getting close to resolve level 5 too quickly, keep him or her on the bench and only bring him or her out for the boss fights. By this point in the game you should have a least a 12-person roster, so you should be able to rotate through enough another characters on a weekly basis.
Best Answer
I almost deleted this question, since I found the answer a minute later and feel like a dolt, but it is in the options menu. It's just that you actually have to be in a campaign to see those options. If you're on the main title screen, you don't see them.