Massivecraft is hardly new to the idea of restricting certain item drops on death, even from another player killing you. Personally, I have found that losing all of your experience on death, only to travel back to the site of your demise and only being able to regain 7 levels, is one of the most frustrating events in Factions. XP takes a long time to build up, especially once you hit 30 levels, which you need for proper enchanting, and being able to lose it all without it even benefiting your killer very much seems pretty unfair.
Essentially, my suggestion is this: Keep experience levels on death, much like how your backpack and armor slots are saved. If that is a little too overpowered, then I would suggest instead on death dropping all of your levels, rather than only a portion, and thus allowing an attacker to be rewarded, and for you to be able to get all of your belongings back when you get ambushed by a creeper in the darkroom. This would improve gameplay by allowing pvpers to collect all of the drops of their victims, and help the victims as they darkroom or engage in generally hazardous activities
Essentially, my suggestion is this: Keep experience levels on death, much like how your backpack and armor slots are saved. If that is a little too overpowered, then I would suggest instead on death dropping all of your levels, rather than only a portion, and thus allowing an attacker to be rewarded, and for you to be able to get all of your belongings back when you get ambushed by a creeper in the darkroom. This would improve gameplay by allowing pvpers to collect all of the drops of their victims, and help the victims as they darkroom or engage in generally hazardous activities