make sure that you don't have AUTO LEVEL engaged. also, for whatever reason, there might be a LOCK on levelling in certain zones or you may have to actually level normally (gain XP to go over threshold) to 'activate' the ability for the character to level up. the game might not let you 'cheat' at certain times in the game.
i've not run into this problem, but i haven't played each and every TYPE/RACE/FACTION of character there is at all zones in the game, which would be nearly impossible-
I am playing an Elf/Mage, and found that the leveling and + XP didn't work beyond 8th lvl, although the max. HP and mana are doing ok. I am also noticing the game will crash when trying to save in the Mage Tower (in the early parts of the game), maybe a conflict with the Trainer on and Windows 7. Not sure.