This way, there's no need for pointless dungeon crawling, to "level-up". It would, I think, take away the focus from monster-killin' and treasure grabbin' and allow more time for plot, since level increases wouldn't be "goals" any more. This way, PCs have to have their own plottish goals, and base their play around getting what they want, instead of just aimlessly stepping through ranks of orcs.
Thoughts? Comments? Raspberries? Cream cheese?