You could then make it that as soon as your pokemon was traded, even if you get it back, it'll obey you by your current level cap rules, but even that is kinda silly in my opinion. Why make a normal story hard, it's not like you'll achieve anything if your friend just trains your poke and gives it back to you. Why should it be challenging like it is now?
You cannot say that for sure. Why would a higher level cap not be favourable, that doesn't really make sense. I just believe that it is stupid when you reach a certain level with your pokemon, it just stops levelling up. For those, who want to complete the game as fast as possible and get to the late game where the MMO part actually steps in with the competitiveness. Like for instance, I like to have one pokemon through my whole play-through that just one shots enemies and I was quite sad to see that my pokemon stopped levelling up, which encouraged me to train my whole team, which would mean, that I'd have to switch between my pokemon in battle and as PokeMMO has battle rules on "set", it is not that enjoyable to see my slow pokemon, that I just switched in, take a lot of damage.
Therefore I think, that PokeMMO needs a line between which pokemon you are able to freely train like in vanilla pokemon games and which you must wait to fully train until the end game.
Another idea that I have is to completely close off Global Trade Link to people, who haven't beaten the game yet; or you could level cap the GTL, so that you could only buy or trade pokemon that match your gym badges- the same level cap, that you currently have in place (ex.:if you have 2 gym badges, you can only get pokemon from the GTL or trade, that are maximum lvl. 27).