First, addressing the OP's concern: I think level-freezing has the side benefit of making advanced Refine Runes more accessible--I don't think it's the main incentive. I doubt swapping out rewards will reduce the number of level-freezers.

Edit: After reviewing the other comments, I realize now that, while my perspective is valid and relevant, It misses the main intention of the topic--the improvement of a flawed event. So I'd like to suggest that (as some others have) to make it power-based, but there are a couple things I'd like to add:
1) I think it should be modified to compensate for rare event ninja too. A 60k player with only starter ninja cannot win against a 50k player with edo deidara, susanoo itachi and shark kisame.
2) A player can't change their level much in the 5-10 minutes between registration and starting the event--but they can easily change their power and ninja. Therefore, I think that a player's power and ninja should be "locked in" during registration--much like the Matsuri--and the calculation for field selection be based on that.

Secondly, and more importantly...

I disagree with the underlying motivation of this issue. Level-freezing isn't an unfair exploitation, it's a solution to the larger issue of whales creating a gap between pay and free players that renders the latter's gaming experience, an impossible struggle to not be the former's constant victims. Level-freezing makes the game playable for everyone. If you remove, or discourage, this approach to playing, you then make this game less playable, and dimini*s lifespan further.

Additionally, I see all too often players that recklessly level too quickly without regard to the consequences. I've had level 70-75 players with 30k power whine about losing all the time in pvp events and approach me asking me for advice. It's hard to tell them, that they made a mistake and it's too late to fix it, but it's the truth. It's also the reality for most games. You can't just dive in to really difficult areas of a game before you're ready and expect to succeed.

Level-freezing is a timeless, smart technique to give yourself the time you need to prepare. In fact, I whole-heartedly think level-freezing should be encouraged. It takes a considerable amount of discipline, patience and strategy. For example, daily rewards (or perhaps the Jonin medal benefits) should provide the option of getting experience or coins, to make freezing more effective.