It'd also kill 5-level Prestige Classes like the Archmage. It's not SUPPOSED to be the only PrC you ever take. You qualify for the class at level 10, let's say, take 5 levels, and then what do you do? Back to Wizard? And, there are some PrCs that simply aren't designed to be your only path. They're meant to supplement other classes, where you can mix in a level here and there to get a character closer to what you want. Unless you can get your DM to design an individualized prestige class for every party member, you'll often need to mix classes to get the abilities that fit your concept, and this applies to PrCs as much as it does core classes.
Yes, it's really abusable to make a character with tons of classes. My favorite was Tattoo, the Weretiger Dwarf Fighter 2/PsyWar 2/Ranger 1/Barbarian 2/Blackguard 2/Assassin 1/ShadowDancer 2 I used against a party IMC. Other than the addition of the psionics, everything on him was from core books. You're not going to stop that sort of character with an XP penalty, so what's the point?