It's true that in the quests of most people combat was mostly limited to either quick jokes or ways to advance the plot, so only really battles against plot-related bosses and such. I think having the engine be social instead would fit much better for what most people use the engine for.

The fact that you could make custom spells actually did mean you could make battles be non-combat. I did make one quest where the battles were kind of social encounters (physical attacks just did 0 damage I think), and another where your spells are paint and your physical attack actually heals, so you can only progress by painting the 'enemy'.

A totally different way to do combat is to resolve it automatically through the use of dialogue boxes, spell flashes, movement/spawning/despawning and taking/giving items to imply actions. Items in particular are super versatile, you can give and take a custom item to do all kind of things, like have a fancy key act as a telephone, or use gemstones to simulate dice rolls.

I'm actually doing a collaborative quest right now with some people from the old AF site, and so far we've had characters do a dance battle, warp into other dimensions, smash enemies with giant pillars and use a different character as a bowling ball. All without any actual combat, of course. It's surprising how versatile the engine can be if you use what's available!