In OD&D there was no Restoration. If a Wight struck and you lost a level, you were stuck adventuring to regain the lost XP. This made Undead terrifying to players, as much as they should be terrifying to the characters. Eventually the rise of a vampire PC named Sir Fang and his Undead hordes influenced the creation of the Cleric class to combat them [Citation Needed].
Quickly the Restoration spell came about, most likely a result of players bitching and moaning about level draining. D&D isn’t a game with lopped-off limbs and plucked eyes, where your adventurer must retire because he took an arrow to the – elbow. While some players consider one character to be “my character” (even from campaign to campaign) and resist attempts to get them to play something else, many players are willing to restart with a fresh PC should the worst happen. But few want to give up on a crippled PC who would otherwise live a long life. I believe this is why there are few rules in D&D that give permanent disabilities.
We have two competing values: Undead need to be scary to players, but players don’t want permanent negative effects.
One way to reconcile these is to give in to players, as D&D has from 1E AD&D onward, in increasingly dramatic ways. Since that capitulation has been thoroughly explored, I’ll ignore it and try the other direction.
You could go for the other extreme, saying that yes, there are things in the world that are insidious, debilitating, horrifying. You may not want to fight this monster, for if you survive you will bear deep scars. I’d suggest telling players this from the start and make it clear that only Wishes can remove level drain (as this is a fairly big house rule) and that by no means will every party get their hands on even one Wish. I haven’t tried this.
Or you could compromise, saying that Restoration exists but there are risks. The level drain is the Morgul Blade of D&D. It is the cold fingertip of some netherworld creature yet grasping at your heart from beyond the grave. Extricating that cold claw has the chance to fail or even get worse. Roll System Shock with -5% per total level drained. This means if you’ve been drained 5 levels, restoring a level has a -25% penalty. Then the next spell is vs. a PC with 4 drains, meaning that SS roll has a -20%, etc.
For 3E use a Fort save (DC 10 + Monster HD + Monster CHA modifier + Total Number of Levels Drained).
Failure means the spell failed. There should be some reason why you can’t just cast Restoration constantly, maybe an expensive material component or a restriction that the spell can only be cast during a full moon. Maybe you get only one chance per month with each character, or only one chance against each lost level.
A critical failure, which is 01-05 on System Shock or 1 on the Fort save, means the creature was able to grasp the unfortunate more fully. This means another energy drain hit as if by the original creature – which may mean two levels lost.
I don’t exactly like that compromise but it’s the best I’ve thought of. Maybe the No Restoration rule would work better. But in that case you can’t use energy-draining Undead like any other monster. Respect how important this will be to your players. Sending a dozen Wraiths against a party is pretty much a “rocks fall, everyone dies”.
It also makes Clerics so much more important, because Turn Undead may be what saves the entire party instead of just invalidating an encounter as it works now. But will the party be too cocky if they have a high-level Cleric?
This will also be a big wake-up call to players who feel like they can bulldoze a dungeon with impunity. Might be a good idea to include a lot of these permanent-injury monsters, such as Vorpal-types (Slicer Beetle, T-Rex I believe), Parasites / Curses / Diseases (various molds and oozes, lycanthropy, mummy rot). Permadeath (except via ultra-rare Wishes of course) would include Swallow and Digest (Purple Worm) and Annihilate (Sphere of Annihilation, Disintegrate).
These should all be rare both to limit their devastation and make their appearance more poignant. There should be opportunities for avoidance if they can identify the threat, and a chance of avoidance for each PC (an attack roll is required or a saving throw is offered). Probably at least one PC will fall victim to the effect before everyone understands the threat level and has the chance to decide to flee or press the attack. It’s possible some valiant hireling will be the one to perish, or some Ranger’s ferret.
But then the DM gets to lure them in. That haunted tomb definitely contains a Holy Avenger, says the temple’s High Priest. That vault is clearly piled high with funeral goods but Shadows flicker at the edges of your torchlight. The ruined castle is home to a Vampire who mostly keeps to himself, feeding on bandits and sheep, but whose lair is said to contain fabulous artwork.
Making certain monsters palpably dangerous asks the question, “Is this fight worth it?”, which is an interesting decision for players.