I’d say in that case
Automatic Bonus Progression is probably a better remedy than Proficiency Without Level. However, I don’t think it’s a given that you have to exchange your treasure to receive XP. I know that’s what Arneson did, and that seems to be why it’s popular, but I know that’s not how B/X worked (not familiar with OD&D or AD&D, so not sure about those). B/X gave you XP just for bringing back treasure from an adventure, and treasure was defined not to include magic items.
Maybe I should clarify?
I'm speaking of my experiences where the heroes quickly concluded they would sell any loot they found, since 500 gold to spend towards leveling is better than keeping the 1000 gp wand (or whatever) around.
Items are clearly intended as nice perks adding to a character of a certain level. Apart from the obviously much more powerful fundamental weapon and armor runes, no item comes even close to providing the benefit of a single level.
In other games (notably every version of D&D except 4th Edition) you can easily find* a magic item that's more desirable than a level, at least once you're off the very lowest levels.
In most iterations of D&D, the game finishes its transformation from snuff movie to hero saga
at level 5 or thereabouts...
*) easy for the DM to find in the treasure lists, I mean. Not necessarily easy for the heroes to find inside the game
Seeing your players adopt a default assumption that everything you find should be sold makes for an unsatisfying experience in my view. I find it fun to come up with and place cool loot that the players are overjoyed to find and keep and use. However, PF2 magic items are too close to 4E items in my opinion, and that's even before we contemplate using xp for gold (when the idea falls apart completely in my experience).
This is why I suggest you need proficiency without level to tone down the benefits of levelling a notch (or five). Of course, you could also remove the magic item economy (so that you're given the choice of using an item or just throwing it away) but as you might know, I quite like having an utility-based magic item economy of the 3E and PF2 kind, and I would considering shutting it down a considerable drawback.
That’s how I plan to handle it in PF2 (like B/X). Doing it that way seems quite compatible with the
system’s expectations, which includes an expected amount of currency per level. It’s easy enough to track how much treasure the party brings back and award the XP once they do. The only tweak I’m making is to use a different conversion rate (1.6:1) to fit it in better with the XP curve I use (which was already non-standard).
In my experience, heroes do fine even if they find zero currency and zero items, with the notable exception of fundamental runes. (Talking about PF2)
And really, even then, it's only the weapon striking runes that make or break the game.
In other words, a high level hero doesn't
need +3 to armor, saves or attacks. The game is already tilted to make heroes stronger relative to enemies of their own level as they level up. (If you don't offer any way to gain potency or resilience runes that just makes high-level play feel more like... low-level play. It doesn't mean the game breaks. At least not harder than some consider the game breaking at low level...

)
But the extra weapon dice is such a stupendously large bonus it's not funny. You really can't expect a warrior to select any other magic item before the next upgrade to her striking rune.