So what it comes down to with level holding is that, for the vast majority of situations, the cons outweigh the pros. (Not necessarily in number, but in general value.)
CONS:
More health in fights genuinely means a lot. (I can beat someone with double or more of my stats using an HEG, if they're level holding at 15 or something similar.)
Might be hard to find effective FF targets compared to your stats, due to the above reason.
You're liable to burn through a lot more medical items when chaining or warring, because even if an attack does the same damage to you that it would to a level 100, that's a much more significant % of your total HP.
You're liable to get Hospitalized due to Crit Fails on crimes much more often. (If the damage from the crime would exceed your current HP, you get sent to the hospital. Often for a very long duration. More HP cushions against that.)
Many factions disallow level holding, so it might be harder to get into a competitive one if you're not already extremely high stats.
PROS:
You might get some free defends because new players don't know how to use tools to guesstimate your battle stats, and underestimate you.
Smurf Weapons can be a major power boost. (This realistically does not offset the difference that HP makes, especially when defending.)
You provide less Respect to attackers during wars or chains. (Base respect gains are based on level, and then modified by Fair Fight.)
At the end of the day, if you're not trying to play super competitively, or if you want to intentionally increase the challenge of your gameplay, there's nothing wrong with it. Torn is a diverse game, and there isn't really a "wrong" way to play it. As long as you aren't breaking the rules, play how you want to play.