Sounds like a bad idea to reward someone for playing well by making the game easier for them, in action games at least.
You didn't really think this through, did you?
From the times immemorial, the reward for playing well
has always been making game easier,
especially in action games, unless it was some kind of weirdo game.
Play well and don't die = retain all the power-ups and kill everything easier, or at least have more lives/health to deal with harder stages later on.
Play well and kill more enemies in a row = get bonus points (usually meant extra life at some point) or some other reward.
Play well and explore a hard-to-reach or secret area = get some bonus.
Play well and defeat an optional hard enemy = get some bonus.
EDIT: Come to think of it, that's one of the main reasons the old games are so enjoyable -
they reward effort. Unlike modern games that foster mediocrity via "no player should lose" mentailty.