I dislike "xp". Going *ding* in the middle of a dungeon just doens't make much sense. I would always do levelling 'off camera' during down time. When they have time to practice new things.
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A trait might be a good reward for a major thing.
GM of mine did that. +2 to Diplomacy because I talked a bunch of hostile monsters out of attacking a village.
I then led them to a safe place where they would not be disturbed (as a Sorcerer, this was after my party all ran away. A victory for Diplomacy!
Got back to the village to hear them saying I had been killed but they had slain all of the monster to try and claim the reward...
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Good rewards:
The obvious: Loot
Reputation - NPC's recognising them, favours that can be called in
A base - someone in a thread said their players were looking for a 'base' in a town. They got one after rescuing an NPC. They can now stay in his attic - this is a great reward.
For bigger thing maybe a Trait - but these should be logical rather than the choice the player.
