That is a very interesting question, and I don't think it was ever addressed in the 2E Dark Sun rules.

My first thought is that the physical changes should not be undone. There is a particular spell cast to change the physical form, and I don't see an Energy Drain affecting that. That means they don't lose hit points (as those are a function of the spell, not of leveling up), AC, breath weapon (if a dragon), or magic resistance. They basically only lose xp, casting level, and spells per level. For a dragon character, I'd require them to create a new obsidian orb to use at their new level (and at each level they gain until they reach their un-drained level, assuming they lost one than one) before they can cast psionic enchantments.

How is this handled in Council of Wyrms?