Birthright: Chimaeron

I don't think service in a levy is voluntary. But disloyal minor nobles might cook the books and make excuses, I guess.

I would only lower the holing level if the levies died and the whole province lost a level.

Yeah, If the holding regenerates regenerate the holding level.

It boosts levying for its intended purpose(since you dont loose your own holding ) but well, lesser of evils I guess

Yeah, just going to go with no permanent loss of holding level(s) caused by levying. I am not sure a loyalty drop is a huge detriment to levying, but we will try with no penalty for now.

What if there's a loyalty penalty if the levies die, no penalty if they live to get disbanded?

Could always do temporary drop for holdings from levy provinces, unless the levies are destroyed out of province.
Could force holdings lost in order Regent, Ally, Supported, opposed
Could make holding loss random

Could make Levies semi-loyal to the holdings that are reduced. Potentially turning them into enemy armies, as they were mustered to fight an enemy, and if the regent is the only one hurting them the target seems obvious.

They do temporarily drop, and will do as proposed: Self, state X, random

Things that would have been good to know BEFORE the game started...

Very large swing in favour of the people who aggressively put holdings in hostile lands compared to the rules as we knew them before the game, yes.

What examples of that are there? ...Maybe BCB/Ghan? (If that's not supposed to be common knowledge, don't answer that.) It doesn't look like a major problem, though, almost every realm definitely has only friendly (known) holdings in it.