I agree with your points about encouraging competition but not murder hoboing.
I worry that only giving XP to the PC who gets the killing blow could lead to a large variance in player levels. Also, wouldn't adding this to loot XP level the players too fast? Have you played with these rules yet?
I am readying to move my group to Shadowdark, but admittedly I have not DMed the game proper yet.
Thank you for your thoughtful reply!