However, and to me just about as important, levels are also a measure (one of many) of the PCs compared to each other.
But when they're a metric comparing PCs they also become a reward...again, one of many as you so well point out...
And that's fine! I've done it both ways, and when a player of course it's usually in a campaign where XP is a reward. Except for those players who found they really liked the levels-are-not-a-reward system. When levels are strictly a metric for the power level of the party (and note: explicitly NOT a measure of the PCs compared to one another; that is inherently eliminated as part of the equation), and all characters automatically are they same level at every point of the campaign, how is it a reward? I ask that in all seriousness. If it is inherent to the system that it will be equivalent for all characters in a campaign at every stage of the game, how is it a reward?
re·ward
rəˈwôrd/
noun
1. a thing given in recognition of one's service, effort, or achievement.
verb
1. make a gift of something to (someone) in recognition of their services, efforts, or achievements.
It is not given to any of the characters as recognition of their service, efforts, or achievements. It really isn't. They don't all get rewarded a level for facing down X, Y, or Z successfully. Sometimes it's arbitrary, usually it's simply on an in-game timer I am keeping track of, no matter what happens any given session. And my players understand this, and know that they will just level from time to time as a way of advancing the timeline in-game. For some games, this might mean they advance a level every session, because we know we have a limited time to play together. Sometimes this means long stretches of not gaining any levels, because what's happening over the course of a half-dozen to a dozen sessions really only took up a few days within the game world. Completely depends on the game.
But they are not being rewarded for their actions with levels. Period.
However, whether combat or not I want to recognize the characters who participate rather than stand back or stay at the inn. That's where xp come in.
All good, but nothing at all says xp can't go on top of all that. The characters involved in the diplomacy get xp for it; the ones who rifled the wizard's tower get xp for that, and those who helped knock down the griffins get xp for that. This allows for a greater reward for a character that was involved with all three activities than in just one, or none.
Well...actually, yes something can say XP can't go on top of that: me, as the DM, eliminating that as a rule.

MOST campaigns will use XP and levels upon reaching certain amounts of XP as part of the reward system, and I am perfectly capable and content to participate. But when I run a game, I simply do not use that system for rewards. And again, it might be that you not only aren't getting rewards for those griffons (beyond their corpses), you may have screwed up the local ecology pretty significantly and ticked off a local druid. Especially if you kill random groups of animals like that.
Side note regarding your wizard's tower example: in our games its a long-standing player-driven tradition that all treasure and booty is divided equally, meaning it's quite rare that a DM can use acquired treasure as a reward mechanism like you suggest here.
And that's fine. But not how it's done in my campaigns, and I certainly don't require players divvy up their cash and booty evenly. On the contrary, it's pretty much whoever benefits most likely takes a specific item, and cash is either pooled per the characters' discretion, or kept for individual rewards. A rogue that successfully sneaks off and finds some stuff is under no obligation to divulge that, and in many a piece of fiction that is the case. A wizard gaining a tower, or gaining a rather incredibly expensive non-magical item like a telescope simply gets it. The other characters will not necessarily be compensated equally in terms of monetary items if it doesn't make sense to do so. But at the same time, being knighted? Gaining a license to kill for the Crown? Those are VERY valuable to have as well. A character will gain significant benefit from such a boon that might very well be "worth" more than a tower, stocked lab, and expensive telescope combined.
So what do you do with all the things that can change an individual character's level on the fly? For example: I have level-draining undead in my game. Decks of many things and the like can give or remove a pile of xp on the spot. Wish spells, rare though they may be, can give or take levels if done right.
Oh, that's easy. I don't use those mechanics. One of the least favorite mechanics in any edition of the game, so readily tossed out. And yes, that includes that particular effect from a Deck of Many Things.
Also, how do you handle characters who die, stay dead for an adventure, then come back? Do they get equal xp or levels for being dead? (if yes, this seems kind of ludicrous)
Well, resurrection is generally extraordinarily rare, and will only happen soon after death. By the time the party has leveled up, it is likely too bring a dead ally back to life. Resurrection magic in particular is one of, if not the rarest form of magic ever performed in one of my campaigns. The very existence of such magic has implications on the economy and the world that are too far reaching to ignore, unless it is specifically tied in to the world as part of the lore. If enough resources can buy you respite from death, what is to stop the nobility and monarchy from taking many more risks, and being raised from the dead? What threat is assassination in such a world? Now, as I said, some game worlds having the nobility have such control over life and death was used on purpose, to exemplify their stranglehold on every aspect of society. The lower classes feared them all the more, because they truly could just come back from the dead, while all the piss-poor members of the other classes stayed dead when their time came.
But generally? Characters don't GET resurrected, unless there is an extraordinary reason to do so. That is not simply a class of spells divine classes happen to have. Most of the "resurrection" type spells instead bring back a recently slain ally, as in slain in this last battle. Bringing them back from the brink of death, not actually raising them from the dead.
And I don't find it all that ludicrous for them to learn from their experience. They were just in the afterlife, in a world where there is actual evidence of there BEING an afterlife. They weren't simply floating in oblivion, they were in the Fields of Elysium, the were traversing the River Styx when they were called back to the mortal world, they were drinking in the Halls of Valhalla, or whatnot. As they say, death is the ultimate experience. Why wouldn't they come back changed, understand more of the secrets of the universe, etc? Not all that ludicrous.
One can assume that anyone else in the game world who is above 1st level is already busy doing other things...
That said, I don't subscribe to full-on ES@1; but I do insist that new or replacement characters* come in either a level or two below the party average, or a level below the lowest, or at a floor level, depending on the campaign. There's lots of other levelled entities in the game world and lots of ways to gain levels other than adventuring; adventuring just happens to be by far the fastest way. But when Kallie the Thief dies and the party go looking for a replacement it's almost certain the replacement will be lower level than Kallie was.
* - unless it is a player's FIRST character in that campaign, in which case it comes in at the party average.
Yes, I agree there's holes with strict ES@1 which is why I don't do it; though with that said it's trivially easy to dream up a logical in-game rationale for it if desired, which might go:
The only true free-agent adventurers are those fresh out of their 1st-level training. To adventure in the field, these characters must first sign on to an Adventuring Company (of which the PCs-as-a-whole are one), and once signed their allegiance may never change on pain of death; this is strictly enforced by the Companies themselves to prevent recruiting wars, defections, and what the modern business world calls headhunting. Thus all experienced adventurers are signed to a Company, and if your Company finds itself shorthanded its only recourse is to recruit raw 1st-level free agents. For taxation purposes, the King's agents are constantly kept advised of the membership of each Company.
While the use of Companies like that seems common enough among gaming circles, I actually find the idea of adventurers only being able to exist under such formally contractual circumstances to be rather...extraordinarily unlikely. It's one thing to sign a contract with one another (see: The Hobbit, many mercenary companies, etc), or be sanctioned by a specific group of powerful beings as representatives of all the lands of the world (see: The Fellowship). It's another altogether to require that any old group of people who get into some sort of adventure together be required to sign on to a formal, contractually obligated company in service of...? One country? All the kingdoms? A neutral group that has effectively the power of a multinational mega-corporation, with contractual power spread across nations that makes the most powerful of merchant houses pale in comparison?
I think of every fantasy novel, sci-fi novel, etc, I've read, and think what their adventure would actually be like if they had to formally join a company, and actually have their activities sanctioned, tracked, directed, etc, in such a manner. It's just incredibly unlikely. And with any set of stipulations even a fraction of, "pain of death" for breaking from the company? Changing allegiances? Yeah, no thanks. In my worlds there aren't actually "adventurers". There is never some sort of class of people out and about who are called "adventurers". While out of character they might be called adventurers, that term would rarely if ever be tossed around by people within the game world itself. Rather like most fighters actually wouldn't be called a fighter. A knight, a soldier, a mercenary, a bounty hunter, a warrior, etc? Sure. A fighter? Highly unlikely. Just not my cup of tea.
To think that up took as long as it did to type it; it's not perfect, but more thought might give better ideas.
And I thank you for it. I understand the general perspective, and appreciate it. I have certainly been on both sides of the table and participated in similar, and am not at all opposed to many different playstyles.