Shackled City and Leveling
My copy of shackled city is in storage, but that really isn't important for my opinion on this topic - that the dramatically appropriate points to level up will depend on player actions. Unless you are staying very firmly 'on rails' (and your GM's attitude towards the xp system indicates a style of play that is the opposite of that) the story and structure of any adventure will change based on the group that is playing through it, and their decisions during the story.
As such, if leveling up should be occurring at dramatically appropriate times, that will vary depending on the group that undertakes it, and where the dramatic moments fall (and the type, and intensity of those moments) during the game's storyline.
From memory, Shackled City's encounters are a bit.. wonky.. in terms of challenge as well, sometimes more, sometimes less. Adjusting those encounters a bit is something that a GM running that adventure path should be doing (to make the difficulty curve a bit less jagged, or more jagged (depends on which kind of party you have, the one that likes simple battles, or the one that prefers Hardmode)), which should give you a rough idea of the CR of those fights - or the level at which the party should be to be able to defeat them. This allows you to more naturally give out levels at moments that seem to warrant such - moments of great triumph, or solemnity, or any emotion the players are feeling really - instead of at a moment you've pre-decided to which might fall flat (depending on situation).
