I have two sets of thoughts on this.
The first is if this resets character levels, you may need to have people spend time testing out the best approach to deal with magic, lores, rages, and then seeing which weapons and armors need to be removed each new game. I fear that the magic/rages/lores issue might break things with the resets, and most of the fun in new game + is having copies of some of the better equipment around to use and abuse. Given some of the discussions that popped up on insanedifficulty about removing the colleseum entirely, the lack of ability to carry over equipment would become a sore point for some of your players, and would take away some of the fun of a New Game +.
My second thought however is if levels and spells/lores/rages are kept (but EL's and their bonuses reset), it might lead to some gamebreaking hilarity, and could be used to create some triggers for 'new' endings (for example, some joke endings would be easy to setup, like a high level Terra using Ultima or certain items and magic against the Snail while it was defending and somehow 'winning the game' due to that and then getting another New Game +, and that's just the start of what BTB and Synchysi could do with something like that). My fear with this however is it might lead to some gamebreaking glitches. Another thought beyond that is it might be possible to 'cap' some stats at certain levels, and allow the EL bonuses to remain, but that's just random talk at the moment.