I'm definitely on the "plot-level setback" side. I usually plan relatively few combats. One per session, occasionaly two, and usually a few ways to not have that combat. Mostly, I try to plan my adventures out as trees, and a combat is usually a branching point:

-The PCs kill the villain
-The PCs take the villain prisoner
-The VIllain escapes
-The PCs escape, but the villain wins
-The villain wins, the PCs are defeated
-The PCs never meet the villain

As usual branching points, with a few notes on what might happen on each one.