Yea, I am beginning to think it was a fluke of some sort.
The only time it has ever happened is the one depicted. The character de-leveled from 2 to 3, then xp'd back to 3 and beyond normally. I gm'd him back and forth between various levels to try and replicate it, but no success.
I don't have any custom code related to exp in place. It's just weird. As far as I am concerned, I spoke in haste and this is not an outstanding bug.
Btw, nice server Trevius. Love the custom content.