Hay, keep in mind this criticism is coming from a griefer/wannabe hardcore pvpzer, but I think your reputation system is terrible.** It won't protect newer players at all.** It just monopolizes people farming them to those willing to put in effort to make single-purpose characters. Also makes afking cheaper/easier.
I've two max stated characters, and a bunch of scout accounts/virtual machines/monitors. I'm going to be scouting the low level farming areas, then simply going in with either a poorly geared character that has max stats, or maybe just an artifact weapon. Realistically, that's enough to kill a newish character in 2-5 seconds with summons, even if I'm not with a party.
I will receive absolutely no penalty for this, the only thing making it even slightly troublesome for me is if other geared/stated players come to kill me I'll be at a disadvantage engaging on them. But that's the thing, I won't. I'm not going to fight somebody if they've a signifcant advantage, and with scouts, nobody with an advantage will be able to fight me. Plus hay, two guys with stats and trash gear should kill a guy with stats and gear.
This will not protect newer players, not at all, because the only motivation a geared player would have to go there is to defend a friend. They won't even gain anything from killing me, other than some arrows/beer/leather armor, maybe 3k argents in value. If that kind of thing were an efficent enough motivator for people to stop murderers, they wouldn't be a problem now. Assuming you go through with the rebalance of items drops, that is, nobody will be there to defend lowbies.
Lastly, it negatively affects PVP.. and makes certain kinds of griefing possible. Most griefing, other than murdering people, is not possible in open PVP games... because you'll just get killed if you try it. I'm sure after this nearly every time somebody AOEs, summons a burning spirit, or has an area effect weapon somebody is going to try to commit suicide on it. I'll be placing loot traps everywhere, trying to make people grey, and stealthing nearby. A great example of this is, it only takes two moderately low level mages in my VMs to keep bandit camp walled off indefinitely, keep them green, and nobody can attack; at least not without losing reputation, and thus losing extra gear when I immediately come to murder them on my green fully geared main.
While I agree that newer players being protected more would be a positive, I don't believe punishing people for murder in such a way achieves anything. I would request people be rewarded for murdering murderers, rather than murderers be simply be punished.
It could be something completely arbitrary, like adding a 'most wanted' to the wall at the bank, and rewarding people with irrelevant penis points for specifically hunting them. Maybe just a straight you get points for killing unique red players. Obviously that system in itself could be exploited, but it's a reward for doing so regardless. Considering the ease with which one can quickly obtain end game gear/stats in this game, end game PVP contests(who gets the most nice-guy-penis-points) would, in my opinion at least, be actively perused. Obviously this in itself would be exploited, but it can only have a positive effect, with no chance of negative. Or you could just make a new player's death irrelevant, by giving consistent uncommon bless scrolls, or incredibly cheap mediocre gear... I mean you already do, but make it more obvious that if played correctly, a noob's death is near meaningless.