>>6 For the light novel comment, there are already some visual novels that use systems like these, where the character's appearance changes depending on the day to day actions you choose through the course of the story. Most of the ones with it have it as a core part of the story, though.
Like there's one where you're supposed to put the character on a diet, and she only gets the guy she wants if she reaches his ideal weight before summer, her sprite updating to match how what you ate would have affected her weight during the week, etc. The sprite updates are a central part of the story. It'd be refreshing to see one that just treats it as an extra gameplay aspect for a regular plot.
But it's obviously easier to do in 3D games since you can subtly alter morph targets rather than re-draw character parts (though I'm sure you can manipulate it similarly in 2D if you're okay with warped textures). GTA V also uses a similar avatar alteration system (where your skills and activities change it's appearance).
I would like idea two better. I don't want there to be a minimum amount of time I have to wait for a game to level me up; it reminds me of those bait-y microtransaction facebook games. Idea one would be punishing your new and potentially most active players by limiting their progress :0