It could depend on the timing of the awarding of experience.
If the DM awards experience at the end of each encounter, then the dead dude gets dudded. He is awarded xps, but can't gain a level through suitable rest or training (assuming he gained sufficient xps to level) and then loses a level on raising.
If the DM awards experience at the end of a session or significant goal, then the problem isn't so severe (particularly when a lower level character gains more experience, based on the xp charts).