ECL does most of what you said. It is intended for balancing.
For your gnome with an ECL of 3. To raise from say level 6 to level 7, you need to earn the same amount of xp as a human trying to move from level 9 to 10. But as it is easier to code, instead of making you need that much xp, what is done instead is the xp you get from creatures is reduced by a factor (more than the 25% you guessed for an ECL 3) and so you gain xp slower which has the same effect as requiring more.
All high ECL characters should aim to take as many or more quests as their counterparts as quest xp is a straight reward based on actual level and ECL does not factor in. If you try to gain levels only by bashing you will find it will take a long time and much longer than your friends you are partying with.