Ok, I understand the intent behind level limits. I don't know if they do what they are supposed to as well as they could. In my gaming experience, most campaigns, unless specifically started at a higher level, (which just seems wrong to me)don't last long enough for some of the level limits to become an issue. Half-orc clerics are probably going to max out, but a half-orc assassin probably doesn't have to worry about it. Hell, the way older games ran, your character was quite likely to die long before ever having to worry about level limits.
I was reading through OSRIC 2.0 recently, and noted that they recommend that level limits not be house ruled unless humans are given a corresponding advantage. I was racking my brains for a suitable advantage, something to make humans viable, when I realized something: back in high school, when 2nd edition AD&D was the order of the day, at least half of the PCs in any given party were human. Nobody every complained about humans not having any special abilities, and really...were the demi-human special abilities so earth-shaking that there had to be balance? Dwarves get an attack bonus against creatures that are likely to be challenging only at low levels. Infravision only worked without a light source around, which meant that if there was anyone in the party who didn't have it, it was unavailable most of the time, as the rest of the party had to use light sources in dark environments. I remember reading the 2nd edition DMG and finding a sidebar where it is suggested that demi-humans would rule the world if not for level limits. I say this is crap. I don't think the demi-human special abilities (+1 with thrown/slings for halflings, for instance) are so drastic that humans would just be totally outclassed. Also, the human ability to advance to any level doesn't seem to hold up when you also have to take into account that the game states that creatures with a class and level are exceedingly rare; I don't think there would be enough high level humans to make the difference should the implied struggle-for-domination scenario occur.
Another thing about level limits that bothers me is that many of them are difficult to justify. An elven magic-user can never reach the heights of power that a human mage could potentially aspire to, yet elves are supposed to be the race with the inherent talent for magic. In many older iterations of D&D or AD&D, elves had the potential to cast magic-user spells while in armor. My reading of D&D has always been that elves are supposed to be better at magic. (Hell, maybe my reading of it has been wrong all this time.) I thought to myself that perhaps elves simply knew that the higher levels of magic were dangerous to use and wisely avoided it.... but even that paltry rules justification doesn't hold up, because casting spells is mostly risk-free in D&D. Of course, you could counter that elves are better at magic because they can be multi-class mages and humans cannot, but humans can potentially dual-class and become mages out of nowhere and so on and so on and so on.
Okay, so a few of my proposed solutions:
1. Ignore them completely. I did with my old group
2. Give humans a little XP bonus, something between 2 and 5 percent maybe. That would refelct the human "ambition" so often touted in the old games, while allowing demihumans to achieve greatness in fields where they are supposed to achieve it. This would be cumulative for any xp bonus based on high prime requisites.
3. Allow demihumans to advance to their level limit normally, after which they must earn double experience per level to continue. This is pretty harsh, but less harsh than "You are sixth level...you can learn nothing else." This could also be attributed to the longer lifespans and "longview" philosophies of the longer-lived demihumans. Humans burn short, hot, and bright, while the demihumans take their time before arriving at greatness long after their human allies have crumbled to dust.
4. Allow humans the choice of some other special ability, something along the lines of magic or poison resistance, a bonus to attack, etc. I actually like this option the least.
Finally, I am considering tooling around with the "Unlimited" levels... perhaps each race has a class that they have unlimited potential in. (Fighter for dwarf, magic-user for elf, thief for halfling, assassin for half-orc, etc.)
I might be persuaded to try a game with level limits, as admittedly I have never played a game where they became a factor. I'd be interested to hear what anyone else thinks about this, or how their games ahve worked out with or without level limits.