Based on my experience with it on N Terraria 6, it turned the game somewhat more challenging, beside due to having higher grade equipments, gameplay on lower level zones gradually were getting easier.
At least, that system avoided the players of power leveling their npplayers (Player level were capped 5 levels based on the most underleveled npplayer), which were funny when reading their complaints, plus made higher level players have some dificulty in combat with bosses and field monsters.
So, based on this, I believe It's a good idea.
I'm thinking about making something like that on TNR, and maybe even on future projects, because will turn it more fair gameplay if you want to help a friend who begun the game.
The system itself does not makes it worthless to have a higher level character, because even if you have passed the level of the map and got at the cap, skills and bonuses from level, for example, would still remain unlocked, but the character will not be as powerfull on his normal level.
In case you want to try the system on your game, create a second level variable that resets to player level at every frame, but can be modified by other scripts, then make all status calculation scripts use that secondary level variable as level value.
int Level = 1, Level2 = 1;This is an example of the code, It may end up different based on what it is going to be needed, but just to give an idea, look's fine.
int ATK = 1, DEF = 1;
public void StatusCheck(int LevelCap)
Level2 = Level;
if(Level2 > LevelCap)Level2 = LevelCap;
ATK = Level2 * 2;
DEF = Level2 * 2;