A) 20 X.P. are awarded for every point of damage a character suffers.(Emphasis mine).
B) 10 X.P. are awarded for every point of damage a character causes. This is subject to a few addendums: a magic spell which affects multiple persons gives experience to the caster only for the damage total of the spell; thus, a fireball which delivered 26 h.p. to four creatures would only award 260 x.p. to the caster, and only if one of the four creatures failed its saving throw. If all four creatures succeeded, the fireball would only give 130 x.p. to the caster. Other spells like burning hands, magic stone, magic missile, call lightning and so on work similarly. I am at the moment unsure of how to deal with certain death dealing spells such as telekinesis or cloudkill, which do not have a specific hit point motif. Thankfully, no member of my party has a spell of this level as of yet.
C) All damage caused against the party is totaled, multiplied by 20 and then distributed to those party members who were witnesses and who specifically took some kind of action in the events, even if that action failed to cause damage or the member was unharmed. This is in lieu of at least attempting to take an action, taking a risk, and thereby gaining experience from it.
The principle of this method is that experience is something that is gained more through suffering and failure than through success, and that it is a much more profound experience to endure damage than to inflict it.
Wow. This, I like. I really want to try it out in my next Castles & Crusades game. The entire idea, I think is a bit morose, focusing on learning from Bad Things Happening To Us. But I see the argument. A kid learns a lot faster the stove is hot when it's his hand that is the one burnt.
I also like the fact that you can get X.P. without defeating the opponent. You're fighting a Wyvern, do a bit of damage, hang in for a few rounds, then have to retreat. You're still getting credit for hanging in the fight as long as you did. I'm not sure how my magic-users will feel about it, but I plan to at least throw it out there.