In order,
BadPenny you would keep your upgrades since you are above level 999. the different tiers are to prevent low level spamming. Unfortunately there has been a small rash of high level people zero'ing themselves for no benefit besides wanting to start over, so unfortunately people do want to start over and give up 10 years worth of work with no benefit. Another unfortunate reality is that I am fully aware there's no way to enforce the extra gold /fsp loss, a good guildie will hold everything for you but that does carry with it a risk. You will have to, regardless, give up lots of gold and likely nine pieces of good equipment.
Mafiosis I accept your ideas, I'm not against the level cap, though that would be an option for HCS to consider. I am aware that the equipment/resource loss would hurt, but I want to make sure people have a price to be paid and that the system would not be abused at the lower levels. Regardless however the upgrade loss is only mandatory for levels under 1K to prevent spamming. I personally don't care too much about the medals but your right there should be a medal or prestige counter as a badge of achievement to go along with the loss.
Xed, I accept you wouldn't, I don't know I would ever reset my level either. But I know I've seen people recently reset their levels manually for absolutely no gain. The people who are resetting are very high level, 3000+, those people need an outlet that isn't just attacking every person they see on the way to zero and hoping for a bounty. If you or I ever got that high in level and got bored, wouldn't you want the option to constructively reset?