I didn’t realize that this has been an on-going discussion for over 8 months, but a couple of suggestions:
1. A pilot report trumps a Mode C reply. ATC: Say Altitude, Pilot response: Level, leaving whatever you needed to be doing! Even if you only have one transponder “Ah center let me try my back-up transponder” as you cycle the on-off switch, cover your posterior! Worse case possible, say nothing and ignore the call (you won’t be the first pilot to miss a “call”)
2. At some air traffic control facilities, there are serious labor/management issues. Most of the air traffic controllers that are bidding into supervision are not the agency’s best-est and brightest. It has to do with imposed work rules and pay freezes for labor, but management gets their pay raises. Management sucks… I don’t know many air traffic controllers that want to be air-cops, but management is looking over our shoulder.
3. There are a lot of new air traffic controllers in the pipe-line. Maybe it is inexperience, maybe a trainer and/or management type looking over the shoulder of the trainee, but most controllers I know have a no harm, no foul approach to altitude deviations if there is no loss of seperation.
4. There are no bells or whistles that go off if you are more than 300’ feet above/below your assigned altitude unless there was somebody 1000’ above/below you! If your Mode C is reporting plus or minus 200 feet of your assigned altitude, the radar display at the center shows you LEVEL! Controller response should be “confirm level at flight level 350 and altimeter 29.92” if you are off by 300 feet or more.
5. ASRS - Aviation Safety Reporting System Save it as one of your favorites!

I would never suggest that a pilot lie, that would violate the public trust in my position as a public servant. But, from my point of view as an air traffic controller at a large air traffic control facility and flying Part 135 on the side (hoping to someday pursue my dream to fly Part 121 full-time), that name on my pilot’s license is mine. I will protect it like a mama bear would protect her cub.