I think this would help out rankings and better show who the better players are. Right now, high score means you played more games (yes, you get more points when you beat a high level player, and you only get points if you win). However, if people actually lost points when they lost a game, it would put some skin in the game.

Some details?
Well, a loss would cost you 1/2 as many point as if you would have won.
If you fall below a threshold, you're limited in the number of ranked games that you can play.

Maybe someone else can flush it out?

That would just be more of an incentive for people to cheat and rig maps and such

Levels in RPG style games are always generally more about time played rather than actual skill level

im not saying this is an RPG style game but what i mean is i dont think anyone is using the levels as a way of determine a players skill level

IT would give players more reason to play each other 10 times or so, each winning half. Since their points go up as a result if you only lost 1/2
I think the points system is flawed and will never show who is good at warlight, but adding that will make it worse.

Points aren't meant to show skill level. They are experiance points (xp in many games). They aren't meant to be taken as a measure of skill, they are, like Mac said, a measure of time played or commitment.