Obviously, it didn't work that way, and it's not hard to see why. For all that people seemingly love to complain about how D&D (of any edition) simply doesn't work when the numbers "get too big," they also like tangible representations of advancement, i.e. gaining levels. Gaining them only to have them be quickly and easily lost later on makes the accomplishment feel Sisyphean in nature, becoming a source of frustration rather than enjoyment.
But then look at all the magic items that granted tons of experience points, almost as if Gary thought to himself "gold to xp isn't enough, these guys might get angry with all the level draining".
Fundamentally, yes. D&D really doesn't have good plans after a certain level, particularly for certain character types. Once you get there, people do tend to retire characters or campaigns (or do level/mechanics-independent stuff). Mechanisms that keep you from reaching that point
ought to be a positive. I think there are a few main problems:
- Advancement/progress feels good, but only when it feels real. So any backslide can't be automatic (else the advancement is illusory). On the other hand, it if isn't automatic, then actually running into the downgrade feels like a tragedy.
- Advancement already felt slow. Whether it was true isn't really relevant to the feel. Each level (at oft-played levels) was about twice as many xp as the last. AD&D had all sorts of other (often ignored) advancement-limiting effects like double-advancement/training costs if DM feels you are changing alignment/not playing your class; having to fight other druids/monks to advance, and such. Also, if (like many) you stopped treasure hunting for more plot-driven adventures, but gp=xp was still the main contributor (or 2e, where the mixture could be anything, but few options contributed as much as large treasure piles did), advancement actually did slow.
- Restoration came out in Supplement I (1975). Seriously-- as rough as running into 'lose a level, there's nothing you can do about it' feels, adding something you could do about it (albeit a something you might not normally have access to, and the bookkeeping around tracking xp before and after the drain and how to fit it all together post-restoration) makes having that opportunity and not accomplishing it feel doubly rough.
Yeah, I think that, especially reading between the lines of the AD&D DMG and OD&D books, and in context with modules from the period, that the default expectation was that games would be a bit more roulette-like.
Big gambles, losses AND big wins.
Magic items, ability scores, character levels, were ALL "easy come, easy go". You could get drained by a Wight in one room and then find a fountain on the same level where just drinking from it gave you a level. Or find just one of them. Or neither. You could find an awesome magic sword then have it destroyed by a rust monster. Anything you lost, you had decent odds of finding a Wish to fix!
Of course, by the time Gary finished writing the AD&D DMG he was advocating a grittier, more difficult game with less magic, one that he found more satisfying after years of already playing in a wilder and woolier style.
And so many of us coming later read his instructions and recommendations and tried to play hardscrabble, hard mode, lower magic, but that was way harder to make fun when the game still had level drainers and save or die poison all over the place, but no longer had wishes and similar easy fixes and power ups everywhere.
EDIT: On topic, I'll cite a rule that made zero sense to me when I first read it and still makes zero sense in any game I'd play now, but which serves as a vital context clue supporting my conclusions above. The limitations on raising ability scores using Wishes, from page 11 of the 1E DMG.
THE EFFECT OF WISHES ON CHARACTER ABILITY SCORES
It is quite usual for players to use wishes (or alter reality spells found on scrolls) to increase their ability scores in desired areas, whatever the areas might be. It is strongly suggested that you place no restrictions upon such use of wishes. However, at some point it must be made more difficult to go up in ability, or else many characters will eventually be running around with several 18s (or even higher!). Therefore, when any ability score reaches 16, then it should be ruled a wish will have the effect of increasing the ability by only 1/10th of a point. Thus, by means of wishes (or wishes and/or alter reality spells) a charisma score of 16 can only be raised to 17 by use of 10 such wishes, the score going from 16 to 16.1 with the first wish,16.2 with the second, and so on. This is not to say that magical books or devices can not raise scores of 16 or better a full point. The prohibition is only on wishes.
This rule is obviously silly nonsense in a campaign run following Gary's (and Zeb's, in 2E) guidelines on how rare and difficult to get powerful magic should be. I'm not sure I ever saw more than one Wish in any given AD&D campaign I ever played in.