As Tofuman said, the system works very well and gives level 200s more of a reason to play.
You can lower the exp rate for them if you want so that it's a bit more challenging, since they'll still keep their items and can still power through quite a bit.
Just a few notes from it being implemented (keeping it rather vague so hopefully easymode SC2 race doesn't attack me):
We did it so that techs stay the same level, and from playing on a FOmarl it seemed fine - just get some TP boosting units or be prepared to use some trifluids, since level 30 techs cost quite a bit. Hunting techs can be a pain, I'd really recommend just keeping them at their same levels.
One thing we DIDN'T do was let players decide whether or not they wanted a mat reset - right now they're forced to get one (retaining all HP and TP materials used, since there's no point resetting those and they're relatively rare). Perhaps you could give the players a choice? It seems to work fine with the mat reset, but you might get fewer complaints if it's just another choice.
TL;DR - Do it.