I think the biggest problem with the way any experience reduction works is the effect it has on group cohesion. A lot of people struggle with maintaining IC friend circles because of problems with availability or generally exclusive behavior from well-defined cliques at higher levels. A defined hard-cap at or near 0 XP (and this forum post has been enlightening to many) would effectively destroy people's interest in dungeoning at all and generally make the entire end-game prohibitive to everyone but certain tight friend groups.
Consider, for example, a friend group that consists of a fighter, a rogue, a cleric, a wizard, and a druid. They all dungeon together and everything's great. One night, the rogue decides to stay up a little late and runs a few dungeons with another group because someone he met asked for a trapper. Well, he hit blind drive and capped at 0 XP before the rest of his usual party, so he's out of the group for a bit while he figures out how to make that go away with other people who aren't dungeoning. The wizard sees the rogue's experience and decides to preemptively focus on RP so he doesn't even hit mentally exhausted. That's two people out, now you've got the fighter, the cleric, and the druid. Now your option's to either find replacements for them or focus on content you can manage as a trio. Chances are you won't find a rogue for awhile so let's just say you pick up wizard 2. A week goes by and finally the whole group is on blind drive except for wizard 2. Wizard 1 and the rogue are both off blind drive now and hook in with other groups who need their valued skills, running through their cycles of finding new friends that need their skills or spending IRL weeks off RPing. Wizard 2 rolls an alt because wizard 1 is taking all the groups for that level. Once the fighter and cleric are off blind drive, they find that the druid also rolled an alt and got more invested in them in the meantime. The fighter and cleric then spend 3 hours a day doing nothing in mist camp because none of their friends are around and few, if any, are available and want to drag them along for the ride. You keep that entire scenario running for 2 to 3 months and eventually your entire group is split up and you're playing with completely new people than when you started- that is, if you found any replacements and are playing the same character at all.
This isn't hyperbole or unrealistic. This is, in fact, how I already have observed all groups working for my past 2 years of playtime both organizing groups and being on the sideline in them. The entire mechanic as it stands is very effective at dismantling groups and stopping people from enjoying their characters enough to continue playing them. It is, at the same time, very effective at preventing the balance between players and the horror theme from spiralling out of control. People advertise their interest in a reduced level cap around level 13 or even 10, and I perfectly understand why. I also think that level imbalance is part of what makes NCEs so thrilling. If everyone is capable of becoming some unrivalled extraplanar entity after a few months of grinding, the horror theme completely disappears.
Honestly? If I were presented with this dilemma, I would hesitate to change anything in particular. I hate how groups get split up, and I hate that you can just talk to your barber to the point that you wake up one day and become a weapon master or can turn into a dragon, but I also think the overall theme is dependent on people constantly being lower levels. I also don't really want to see the level cap lowered either, because people who actually enjoy playing this game can get a satisfying challenge in what I'd consider are incredibly well-balanced dungeons up to level 20.
If we were to take a step towards leniency, I'd think for the sake of realism that XP from RP should be dramatically lowered and instead RP should count double or even more toward reducing the XP penalty from blind drive. In this way you'd get people roleplaying more and they'd move through tiers of dungeons a little faster, removing the need for them to grind those dungeons over and over, day in and day out. Though with the horror theme in mind, should we really be lenient? This simply sounds like a problem of lacking enough content for the current size playerbase.
That all being said, one of the biggest reasons I ran dungeons with blind drive is because I believed the XP cap stopped at 90% reduced experience. I'm one of those people who thought you could just 'power through'. Knowing now that it can potentially be reduced to 1 XP per mob simply makes me averse to playing my character all the time. Of course, that kind of information could have been displayed in actual numerical feedback in-game instead of the indecipherable 'experience gained' notices we currently get and probably dissuaded people much sooner. I'll agree with previous posters that this needs to be far more obvious.
This also made me think of another question of whether we should potentially consider increasing the level cap or increase the variety of templates for AMPCs so they can threaten people beyond western Barovia, but that probably deserves its own thread