More and more I am coming around to the idea that we don't need an xp penalty anymore, or at least if we do it should be drastically reduced.
We have a hard cap and a very limited level range to play with, and I think that it would be better while we have a limited pool to design around new concepts that are inclusive rather than exclusive.
Redesigning quest design so that they can be done with the entire level range in mind is pretty easy I think, and ends up looking like this:
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Being able to set your own difficulty scale (Taking on challenges that are more difficult for greater reward, or lesser challenges for less reward) is massively rewarding from a player's standpoint.
What this does as well is allow you to scale rewards. No longer are low levels strictly the best source of resources, because the content also carries over to other tiers of power. When advancing, you only ever increase the amount you receive by doing a quest using this system. In addition, you have the ability to scale up each quest giving you more space to expand the story and scope of each quest thus making it much more satisfying for players that eventually complete the quests totally.
With the limited level range I genuinely think this is a VERY good design choice. We have the opportunity while content is at a low to start redesigning our content to fit a mold that is more inclusive. We have to face the reality that we're a low population server and that creating content that anyone can participate in (but not necessarily complete) is a better design option than what we've been basing our systems on from days of 55/55.