The problem being is that unlike in AD&D, where level differed by class, you cannot EVER really catch back up. While 5E can accept a 1 level differential fairly well, at 2 level differential it becomes a problem, and by 3 levels you're just a sidekick. This doesn't sit well with many player, and depending on the method of new character creation for the game, I've seen players retire characters (in order to catch up with the group) or flat out quit the game. This is part of the reason that a lot of groups like using milestone leveling instead of XP. I'll agree that harsh things should happen to the characters (I've modified death to suck a lot more in my games, for example), but this type of punishment is too harsh IMO.Totally disagree on this one. Yes level loss is bad - and that's the whole point! Lose a level or two or three and you either have to do a lot of adventuring to catch up or find a very high level Cleric and pay through the nose for a (Greater) Restoration. In broader terms, given as how death has been made relatively trivial to overcome there need to be other things in the game that can really seriously knock a PC backward long-term. Level loss is one such.
And yes, 3e and 4e didn't handle varying in-party levels very well, but all the other editions do.
I think it already exists with the Deck of Many Things, IIRC, but I'm not a huge fan. It causes the same imbalance that losing XP does, just for everyone else. With the right group (non-competitive), it's much better than XP loss, but in the wrong group (competitive) it causes too much player conflict.And does this also mean you'd never want to see random XP gain mechanics e.g. one of those Tomes that bestows a level on whoever reads it?