A more traditional EXP based one seems to be pretty easily understandable and the standard.

A more milestone based one could prove interesting. Would perhaps cut back on some number crunching, and maybe feel a little more natural, but that's just from the perspective of someone not used to D&D. 

So I'm not too bothered either way, really.

As for the whole gaining new abilities and spells thing, gaining the new stuff during a long rest I feel might be more sensible. That said, being able to gain new abilities during a boss fight for that shounen power up at a key moment is always great.