At high step rates you are probably not getting a lot of current through the windings of your motor due to the inductance, so you dissipation will be lower. At lower step rates there is more time for the current to build up, hence more power dissipated. What is you motor drive voltage? The L298 is really old technology, you should be looking at something a bit more modern, preferably with a chopper drive to limit current . Perhaps look at one of the Allegro chips.
It is standard practice to use a reduced holding current, but once again, without a proper chopper drive to limit current, you are likely to burn something out, or at least reduce its lifetime.