It's good to see that people are liking the whole experience thing. Here's how some other games do it.
LunnaOfLothar mentioned how it works in .hack//enemy
For Dreamblade - Depending how you place in a tournament you get a number of points. Each time you enter ANY premier level tournament you get rewards equal to your number of points. (ex: 100point = 1 dice, 200point = 2 dice, 300point = Limited Edition Figure) So using the following example each time you enter a premier level tournament if you have 350 points you will recieve 3 dice and 1 limited edition figure. So its more of a threshold thing that resets every year.
For MTG - Someone mentioned the Pro Player Club thing. Each Pro Tour a player goes to rewards a number of Pro Player points based on how you finished. (These are Just examples as im not really sure exactly what the different levels award)
20 Points for LVL 1 - 3 round byes at every GPT
45 Points for LVL 2 - Level 1 rewards PLUS Automatic Invites to every Pro Tour
60 Points for LVL 3 - Level 1 and 2 rewards PLUS airfare to each pro tour
80 Points for LVL 4 - Level 1 thru 3 rewards PLUS Hotel accomodations at each pro tour and $500 appearance fee
120 Points for LVL 5 - Level 1 thru 4 rewards PLUS another $500 appearance fee for each pro tour ($1000 total) and $250 appearance fee at each grand prix.
You get the idea.
These levels are sort of like thresholds AND get reset to some extent each year.