To illustrate how this change would affect level progression, I will give an example from early on and from later on:
Currently, 2nd level ECL2 PC trying to progress to 3rd level needs 10,000 XP (the XP requirement for 5th level, which is 7,000 more than a regular PC needs to get to 3rd). In other words, an ECL2 character needs 333 percent as much XP as the normal PC.
Under a 20 percent penalty, this cost would be 2,400 XP (400 more than a normal PC).
That seems way easier, and it is. But over-time, the 20 percent penalty slowly worsens. Here are two more examples:
To reach 18th level, the ECL PC needs 190,000 XP currently (20th level for everyone else).
Under the 20 percent penalty, the ECL PC would need 183,600. That's still less, but it's reasonably close to 190,000.
To reach 20th llevel (which an ECL PC cannot currently achieve), the character would need 228,000 XP, versus the regular PC's needing 190,000.
All of these are still substantial penalties, so they would not make playing an ECL race be doable at no cost. They would simply reduce that cost a lot at low levels, somewhere in between at medium, and not change it drastically at all for high level ECLs.