I like how you mention LA not being a penalty. Players seem to overlook that when avoiding races with an LA. Although, there are rules in Unearthed Arcana that allow you to buy off your LA with XP. There is nothing that I am aware of that gives rules on using gold to buy off LA. I don't even see how that would make any sense unless you were to pay a skilled Imp to remove some of your racial traits via surgery and magic. Get rid of your beneficial racial traits and then you won't receive the LA any longer.
The reason for spending XP to "buy off" your LA after level 3 via the rules in Unearthed Arcana is because a lot of the racial traits given become less beneficial during higher levels. It's too the point were those nice racial perks you got at 1st level are overshadowed in comparison to what the LA 0 race gets due to his extra class level when you reach mid levels. So they are behind a level during the first 3 levels, which seems fair. Then they finally earn that class level and are on par with the other PCs.
I actually use XP buy off in my game and it has enticed more players to play LA +1 races (when nobody would before) and I do not notice any creep in their power level even at level 5. It seems perfectly balanced.