Hey, i'll give you an answer to number 1 and 2.
1.) There is a purpose to leveling up. With leveling up, you can use the points to rename your items(with an anvil), enchant items, and alot more. Not just that but some servers for MC, have markets that you have to use the points for the items you want.
2.) Yes your levels drop to 0 when you die. If you can get back to the spot where you died, you might be able to retrieve some of the points(if not all), along with the items you had in your inventory.