A penality (lvl - 1) *500 to xp (0 if you die lvl 1, 10k if you die 21) would make going around with CA or a armor advised, and will make the alt less interesting, every time you die you must xp again, so you would concentrate on a char
Death would be more feared, and this is realistic.
Maybe a little penality will suffice (lv - 1 )* 50 (0 lv 1 , 1000 lv 21)