The titan keeps its level even if its killed. I find it super retarded as well but a lot of people on the forums will speak otherwise... I dont what the devs are smoking but it ought to be damn good because the balance in this game is the worst i have ever seen in an RTS game... I mean a Titan can solo almost everything, why build smaller units? It just feeds it levels..
In very long single player games, this can be true because you're really not playing to win. You want to enjoy yourself, watch some fleet battles, have fun. But in competitive play, everyone goes for the win ASAP. Love level titans can be killed quite easily by a better fleet with a few good caps or even just a starbase. Its a rare thing for a titan to hit level 10 there, and if you get one to 10 you probably deserve to win. And if titans didn't keep their levels, you probably wouldn't get a chance to level up another titan again.
I found a way to mod the titan set up so that they don't keep their levels however, so I suspect someone will finally get around to making one eventually.