Due to how the experience ends up scaling to levels 75%-80% would have a very minimal effect. It would be better than nothing - but I've played with the mod that removes 75% exp and even that seems to barely stop the levels coming in. I know that seems crazy but take a look at the level chart.
Ideally exp reduction would keep you about 2 levels below what we normally hit after the first island. I'd say hitting the end of the 1st act at level 7 should be the lowest you'd want to aim for.
As for armor - I'm all for that as a component of the "insane" difficulty.
+%hit points
+%armor
-%money
-%exp
Just my opinion but I think that could be great.
