Please, no de-leveling ever. It doesn't make people play smarter or better, it makes them play only as well enough as they have to to not die. Good players play well for the sake of not being terrible at the game, not out of fear of a death penalty. Players who know what they're doing should do so regardless of the consequences of death.

If anything loss of XP/levels creates an unfriendly environment. People are quick to blame or hate others who may or may not have slipped up if it resulted in a death. People hate losing things they've worked for and if they can blame another for it they will. This also makes people afraid to try anything that could potentially get them killed, like anything other than the optimal party setup. People already don't like wandering far from the optimal setups or taking risks as it stands.

I don't see any upsides to de-leveling other than a masochistic kick in the balls after failure. Why do we need to be punished further for dying? Shouldn't we try to not die simply for the sake of not dying?