I thin no levels could work really nicely. However we won't get the same feeling of progress. Could this turn off the mainstream? I don't know.
how would it not? without levels there wouldn't be level scaling, meaning enemies would stay relatively static. you start out and pick a fight with a guard and he drops you in seconds, but you train your skills a bit and pick a fight with him again and you'd completely dominate him.
of course, everyone else would hate you and probably try to arrest you. c'est la vie~*
a level is just a number.