Bearing in mind that onlooker feedback is not being solicited for AVWW, the leveling concept is pretty important. I hope it's OK if I toss out some thoughts on the subject.
Specifically, I'd like to note the general design principle of not mistaking the goal for the mechanic. Leveling is a mechanic -- it's one means among many to a particular end, not an innately desirable end in itself.
In this case, the goal in question is to provide a reward system that keeps players wanting to play a computer game. A good such system will be simple (i.e., easy for players to understand and for developers to implement) and will generally remain effective as player mastery increases.
The beauty of the leveling mechanic in a character-based game (such as an RPG or an action-adventure game) is that it's an abstraction that neatly satisfies those requirements for many gamers. The downside is that there are plenty of gamers for whom it's not optimal -- for these gamers, other mechanics might serve as well or better, but very few games provide such mechanics.
In particular, there are gamers for whom a "magic number" (even if it's attached to the player rather than to the current character) is rather offputting -- it just "feels mechanical." These games are usually DikuMUD descendants, which are designed to cater to the gamer who enjoys overcoming simple, clear goals in return for tangible, collectible status markers of some kind. There is
absolutely nothing wrong with that playstyle... but not everybody shares that playstyle.
It's these Other Gamers who usually call for character-based games to implement some reward schedule system other than leveling. They may not have a specific alternative mechanic in mind, but they know they're tired of being treated as though they'll be satisfied by yet another game based on "kill it and take its stuff." (I'm not suggesting that AVWW will be such a game; I'm just making a general point.)
So what about a specific idea for a reward mechanic that isn't simply to expose a magical "level" number, then? For gamers who enjoy exploring character (e.g., roleplaying), a desirable reward might be access to participation in more complex stories, or stories involving particular subjects or themes. Naturally there'd be "magic numbers" representing these options, but those numbers would be internal. Externally they'd be abstracted out to descriptive terms: completing easy stories such as "A Simple Request" could lead to opportunities such as "A Challenging Quest for an Artifact" or "An Epic Struggle Against Social Injustice." As with the "level" mechanic this approach would scale with player mastery, but the emphasis would clearly be to reward participation in the NPC social network rather than "the more stuff I kill, the more stuff I can kill" gameplay that most of today's RPGs are designed to emphasize.
Another mechanic could in fact be the elimination of the "leveling" concept completely, letting the exploration of a vast gameworld be its own reward. A game like this would need to be designed so that the gameworld itself is structurally complex -- in other words, there would need to be a great variety of systems to explore in both number and depth. (Making the world visually attractive is probably also important for a game like this.) High explorability would satisfy the requirement that there are always short-, medium- and long-term rewards just on the horizon, yielding that highly sought-after "just one more turn!" feel.
Of course game design is a process of generating and selecting among action systems for both aesthetics and functionality, one result of which is that you can't please everybody. If AVWW is meant to appeal to more traditional RPG players, then a leveling model of some kind is a perfectly reasonable way to go. It'll mean that the game loses some appeal for the gamers who are tired of what they perceive as "grindy" games where sheer persistence is all that's required to "win." But a game designed to appeal to non-traditional gamers, who enjoy more abstract rewards, would undoubtedly produce a lot of "WTF?" (and worse) comments from gamers who have always lived in a world where characters must advance and where that advancement is tracked as a tangible numeric asset.
So I'm not about to criticize the choice for AVWW to use character/player leveling (in some form) -- at least not until I've played the game in some form. If that mechanic really does turn out to be the optimal way to achieve the goal of persuading players to keep playing in the otherwise non-traditional AVWW gameworld, then I'll be happy to have it.
If not... well, then, with the indulgence of the forum masters I might have a word or two to say on the subject of alternative reward models.
--Flatfingers