Over at Renovating the Temple, Patrick Halter posted about level drain in GURPS terms as a possible drain of character points.
I started to respond there and decided I'd do it here instead.
How I do level draining undead
For my wights, I went with a normal HP-damaging claw attack, but with both a followup FP (fatigue point) drain and paralysis. Any of the claw damage penetrates the armor and bam, you have a nasty roll to resist paralysis and you start to suffer from exhaustion. That can quickly lead to death - not many people have a lot of FP, it's usually down from effort, and you die at -1 x FP so you've got less chance to survive than you do from normal HP loss. (Editing later: as Douglas Cole pointed out, you don't die at -1 x FP. You go automatically unconscious and your further FP losses are from HP; I meant you are effectively in a death spiral at that point and should have said so more clearly).
Why this way?
Because they're scary (assuming they get through your armor) and potentially lethal. Plus it gives some of the flavor of the temporary stat-draining undead of Rolemaster.
I figure if I use incorporeal undead that do this, maybe I'll make it Cosmic (Ignores DR) and that'll make them really terrifying (a few hits to death, extremely hard to stop). A followup effect like aging or adding Unhealing to the PC (if they can't be cured until some curse is removed) or Wounded (for damage that leaves a weak point even after the HP are cured) would make the attacks nasty, too.
I like that approach and I feel it makes life-draining undead really scary.
But I also do this because Character Points don't really exist in the game.
They exist in the meta-game, in the rules we use, but they don't exist in the game world any more than the die rolls exist. They're there to generate characters and put a balance-of-cost/tradeoff structure on making PCs. Why would getting clawed by a wight make your skills go away, or permanently ruin stats, or make you lose advantages? And if they did, why would they do it through the meta-mechanic of character points instead of a specialized attack that drops stats or inflicts disadvantages through Afflictions and modifiers like Cosmic? Who would choose what goes away? Would it have to be in reverse buy order (and what's the buy order of a starting guy?) Could you lose knowledge this way, or only physical stats? What happens when you lose 10 character points and decide you weren't using Fast-Draw (Arrow) anyway so you'll ditch that?
It's a potential mess.
It doesn't seem like it would be smooth in play, either - "Okay, let's stop while you ditch 10 points."
Plus, like I said, it's not like PCs in the game world have character points. Your paper man does, but what the paper man represents doesn't. Why not stat up attacks that have some kind of reasonable-to-explain game world mechanic?
"You lost 10 character points" is odd, and brings chargen back into play as a negative effect, while "Your health weakens; lose 1 HT" or "You gain the Wounded disadvantage" makes a lot of sense to me. It also keeps them scary, as no one likes getting slammed down with a new disadvantage or near-permanent damage.
I've come across the term "disassociated mechanics" before - stuff that works as a game-rule but doesn't really make sense in the game world. I personally find level drain feels like way to me. What is it? It's a drain of holiness against a cleric, magic power and spell knowledge against a magic-user, of fighting power against a warrior, and of who-knows-what against an NPC monster. It makes sense as a scary "you lose stuff you worked hard to get!" power in the game rules, but in the game world? Why not go with the aging of ghosts, or make them unheal-able HP losses ("You wounds will not close!"), or some kind of long-term or permanent stat drain? Those numbers mean the same thing for everyone, while "level drain" means something different for each class and each level it's used at.
I'll probably catch hell for saying all of that, but that's how it feels to me. It never felt like it had a good in-game reason other than Gary Gygax wanted to put some real tension into the game for his players.
So it's not something I miss, really. I read it as shorthand for "this sucks badly, and for a long time after" without getting hung up on the odd and very gamey mechanics used in its original class-and-level system.