I actually like the D&D 3rd edition rules for level drain. There are negative levels, whose effects are easy enough to compute that they can be conveniently applied in battle. Then 24 hours after the level drain, there's a Fortitude save to see whether you lose a level permanently, with all the character-sheet updating that requires.
The PCs in my game are about to take on a vampire, so I've been thinking about how the level drain might play out. Liandra can cast restoration twice a day (I let druids cast it, because I wanted the party not to completely miss out on higher-level healing for having a druid as their only healer). Restoration eliminates all negative levels, and restores one lost level if cast within a day per caster level of the level drain.
I was pretty happy with what I'd thought about this; if the vampire inflicted negative levels on most PCs, Liandra couldn't restore them all immediately, but almost certainly could restore them within a day per caster level. So there would be loss, but mitigatable loss.
Dani pointed out a better solution: since they're going into the situation with preparation, they can prepare a couple of scrolls of restoration, and use those to eliminate any negative levels before they result in actual level loss.
Sigh. With planning, the party's secure against domination and against level loss. It's going to be non-trivial to make this vampire battle exciting.