Okay, so, some ideas as to what it might look like for characters to level up. First: I want to tweak the character creation guidelines a bit. Currently, it's set so that your stats add up to +3, you have three talents, and you have one weakness. (And some characters have extra weaknesses with extra talents.) However, since I ended up making stat bonuses and penalties viable talents/weaknesses, I feel like it doesn't make as much sense to divide it up like that. So instead, a starting character's stats, plus their talents, minus their weaknesses, should add up to five. We'll call that a level 5 character. I do also want to keep that every character needs at least one weakness.
So, when you level up, you can either gain +1 to a stat, gain a new talent, or you can do one of each and gain a new weakness. (I think I'm going to rule out doubling up on stat bonuses/talents with a single level up, though.) As for when, exactly, you level up, I can either put together a simple experience system, or we can make it simpler and have everyone who makes it to a checkpoint and returns to the safe haven gain a level.
As for new characters, I think they're going to start one level lower than the weakest current party member--or level 5, if that would be higher. So we'd start to see new recruits getting stronger once existing heroes start to hit level 7 and up.
Thoughts?