I think a lot of people aren't understanding the purpose of this idea. It's not arbitrary or meant to punish hardcore players. It's a temporary measure designed to promote long-term balance between teams.
When SZ came out, an Evil guild called <Ruin> massively poopsocked during the first month of the server. The fact that this gave them a huge head start in PvE was imbalancing enough, but the real problem was the "brain drain" effect this had on the Good and Neutral teams. A lot of Good and Newt players, upon seeing how far ahead <Ruin> was, saw the writing on the wall, and re-rolled Evil. They thought Evil's early advantage would prove insurmountable, and so re-rolled to be on the winning team. As more and more people did this, it became a self-fulfilling prophecy.
With level caps in place during the first few weeks, no one guild or team could race ahead the others by poopsocking 20 hours a day. This means that by the time the caps come off, each team should have a good number of level 40+ characters who would not be tempted to re-roll on a whim.
When you're a level 10 Good playing on day 5 of the server's life and see there are already level 40 Evil players, the temptation to re-roll and join that side is understandable. Level caps during the first few weeks prevent situations like that from happening. This should go a long way toward ensuring that each team has good long-term prospects by keeping the losing teams from bleeding players early on.
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