Is this change to how XP works in D&D 3.5 unbalanced?

Question

I have been concerned for a while about how to treat experience totals in D&D 3.5 when a character gains or loses Level Adjustments (LA). Gaining/losing LA in play is too punitive and is inconsistent with the rules for starting with LA.

Under a strict reading, the rules work like this: A starting first-level character with the drow template has LA +2 and gains levels at the rate of a third-level character. This is implemented by starting with 3000 XP and needing 6000 total to advance to second level. Compare with a character who starts as a human, is immediately bitten by a radioactive elf, and gains the Drow race[1]. He gains LA +2, and needs 6000 total XP to reach second level (ECL 4). Not only has Drow-man been slapped with a major penalty, he has to earn 3000 experience before he is back to the starting point for first level. If he had previously gained some XP, it is also completely undefined how many XP he can spend on e.g. item creation.

I solve this by adjusting current XP when LA changes: subtract the experience to reach the character’s former ECL, then add the experience to reach the character’s new ECL. So for Drow-man, I would subtract the xp to reach ECL 1 (zero XP) and add the xp to reach ECL 3 (3000 XP). This makes it so you just need to gain the XP to level at a slower rate, instead of being penalized for not leveling slowly before.

I’ve used this approach before in play to deal with PCs contracting lycanthropy, and it worked fine. However, I am concerned that there may be some balance issue or exploit that I have not considered.

So: is there any way that this change is worse than RAW?

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[1] Of course it doesn’t usually work that way for Drow. But it does for lycanthropes, and I want to avoid discussing gaining hit-dice while introducing this.

Answer 1

It’s an improvement, no question. Your hypothetical were-drow still needs 3,000 XP more in order to level-up to ECL 4th, whereas his unbitten companions need just 1,000 XP to reach ECL 2nd, and he still gains less XP (as a higher-ECL character) than his allies in encounters, so the LA is definitely still affecting him strongly. That’s still quite a distinction.

The only things this overlooks—or, perhaps more accurately, makes no attempt to address—are all the myriad problems with the ECL system in the first place. This brings the were-drow in line with the natural drow, but the natural drow themselves have a lot of difficulties, and cause a lot of difficulties for the DM. All of the problems described in this answer about LA and XP still apply. So while this is an improvement, “better” should not be confused with “good.”

Personally, I don’t use LA or XP at all: when necessary, more powerful racial or template options are scaled back so they can be used as “LA +0,” XP costs are eliminated, and characters are always the same level. They level-up when it seems appropriate to me based on their achievements and how long it’s been. I see absolutely no benefit to trying to bring numbers into things, and can say unequivocally that this approach has been vastly superior for me than the official one.

Answer 2

It lets you gain arbitrarily many levels with a little work

There aren't really any issues with the gaining a bad template part of your houserule. The problems happen when you lose the template. PHBII says:

Level Adjustment: If your character’s original race had a higher level adjustment than her new race does, you can replace any lost level adjustment “points” with the same number of new class levels of your choice. If the new race has a higher level adjustment than the original race did, you must remove class levels until the character’s effective character level is the same as it was before the rebuilding occurred. You can choose the levels lost from all those that the character has, regardless of the order in which they were gained.

Which, while talking about race changes specifically, is also referenced by that book as how to add or remove templates.

So Drow-man, after his transformation, can drink a Potion of Undrowification or what have you and then, when he turns back into a human, he gets 2 class levels. If he's still got that radioactive elf around and has a supplier for the potions, he can easily convert each reversion of the drow template/race/thingy into 2 extra class levels without any adventuring or anything.

Moving away from hypotheticals, there are a fair number of ways to get rid of templates that incur level adjustment, because a number of them are inflicted as Bad Things on the PCs. For example, there's Lycanthropy, which you've already mentioned and which has racial HD that make things more complicated, but there's also Vampirism, which gives you 8 level adjustment and can be removed with Resurrection. That lets anyone with ~11,000 gp buy 8 additional class levels, which is presumably a problem for you.

This isn't a reason not to use your rule, though; just remove the right amount of XP when a creature loses a template and it will work out fine (or, at least, better than LA normally works out).