I recently had two thoughts about uses of Level Drain in D&D variants.
(I don't actually know why these came to mind because I haven't been thinking about D&D much lately, but these ideas come to me none-the-less.)
Level Drain could be used to simulate big, long-term injuries. Hit Point loss gets recovered quickly in game terms with healing spells and potions all over the shop, but Level Drain takes a while - you have to build up the XP to get back to where you were and for a while you aren't as good as you know have been in the past.
So if you were running a "soft" game whereby you didn't want to kill PCs at 0hp, you could rule that 0hp for a PC means "bad injury". The PC is now totally out of it and has to be carried out of the dungeon and next time out, the hp will be recovered but a level has been lost. You can put an in-game gloss on what this injury is exactly but until the level is recovered, the PC is still recovering from it. And if they retire the PC thus depriving him of a chance to recover - well, Fanjion the Fighter's broken pelvis from that fall down the pit never set properly and so he retired in order to run the local spit-and-sawdust boozer.
A 1st level character would be relegated down to 0-level status and forced retirement, his injury losing that little bit of superiority he once enjoyed to the man in the street. Alternatively they could just be dead.
You could also rule that if a physical or mental injury that occurs in-game and cannot possibly be handwaved with "just lost a few hp and had enough to not worry about" (e.g. shot in head at pointblank range, impaled on rusty spike, loss of limb) the hp could be lost and a level or two.
This also leads onto the second idea I had which was weapons that dish out Level Drains, mostly guns and blasters. D&D's "survival under fire" hit points have never really fitted in with guns so perhaps a Star Wars-type blaster could just dish out a Level Drain as it's damage and bypass hp altogether (other than that which is lost as a result of level drain). Perhaps a Save vs Wands to turn that hit into a narrow miss or a Save vs Dragon Breath if the incoming fire is more, well fire-like I suppose.
This would speed up record-keeping since in a firearm/laser fight, 1st level mooks (Stormtroopers) are just alive or dead with a single blow and don't really need hp at all (I believe 4E does something similar to this). It represents that fact that there is really no such thing as a mere flesh wound from a modern or futuristic firearm.
Once you take a blaster hit, you lose hp because of the level and just about everything you do as a D&D character that relies upon game mechanics gets knocked down a bit. Another quirk in this system is that once a PC gets to the high levels where the xp needed to level up is comparitively small (the +x hp per level with no CON modifiers sort of levels) he recovers from Level Drain injuries much quicker.
Everybody hates Level Drain but viewed like this I think it might be one of D&D's best mechanisms.