So with the help of my wife I have fully leveled up all my characters through multiplayer mode. Last night we hop on again to play just as we always do and after we start playing through a bit our characters pop with the upgraded level 1 notification you get when you hit a level. It was definitely resetting abilities to level 1 because our characters would move slower and the guns wouldn't fire as far or fast. When we finished the level the character upgrade screen showed the characters fully reset at level one again. So we reset the console and started a new game. Now going into multiplayer mode I only see the level unlocked that we were playing on, level 6. finishing a level all the characters are still on level one as if their progress reset. It's like once you are fully upgraded and another player plays on your account it will reset your character stats and progress.
To clarify I was player 1 signed in to Live as myself. When the game started she signed in as herself on player 2. This is just was we have always played and have never had any issues before the characters were maxed out. So now we are back to square one with all characters on level 1 again.
It just happened the same to me but i was playing by myself. I was leveling up the characters by repeating some levels and after one of them, every character went to level 1 and my save just went to ashes basicly. Now i have to start the single-player all over again i was at level 7, almost finishg the campaign. My characters were very upgraded and now i dont feel like doing all over again cause the game aint that easy. Those bosses are a pain in the ass in the beginning.