My take:
LW, all by itself, could make a metamagiced spell up to 6th level with no problems - within the "standard" limitations, of course - so you could use LW to make a Maximized Fireball (regardless of whether or not you know the Maximize feat), or a Quickened Fireball (again, with or without knoweledge of Quicken), using 300 xp and the standard level-7 slot of LW, but not a quickened Maximized Fireball, as that would be a 9th level spell effect (Heighten from inside a LW has no effect, as any spell cast with LW is already a level-7 spell for purposes of such things as saves).
However, I would also permit putting feats that the caster knows on LW from outside, and have them bleed into the spell LW is emulating - thus, you could Heighten LW up to 9th (and thus use a 9th spell slot...), and then use it to cast a Maximized Fireball, to get a Maximized Fireball with save DC's based on a 9th, or use Silent and Still to run that Maximized Fireball without verbal or Somatic components; however, you couldn't maximize LW (10th level spell slot... well, you could at epic levels... maybe) so you couldn't use LW to make a Maximized Chain Lightning in this manner.
As for removing the EXP cost when duplicating a spell..... what would that do to the limitations of Sorcerors? As-is, it's still a spell a Sorceror could want (can duplicate Permanency at no penalty other than the higher slot, all of the self-only spells that Permanency can anchor, and many of the other spells permanency can anchor). With the limit removed, a 14-th+ sorceror scarcely needs to worry about his spell list at 6th and below (Oh, you need Greater Heroism? I can do that! (Bluff roll....) Yep, right here! (casts LW)) 3-6 times a day. It would probably be too much of a flexibility boost for Sorcerors. With the XP cost, it's not so bad - the Sorceror will likely only use LW to dupe a spell when pressed, as it actually costs him something other than his relatively plentiful spell slots. Don't get me wrong - it's great for when players don't have munchkin tendancies, but for any that do....