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1. Is power leveling/boosting lower level characters by higher level characters inside instances with mob tagging trick possible on Lordaeron? What I mean is pulling a lot of mobs inside an instance, then making your low leveled friend "AoE hit" them, then exitting the group to make your low leveled friend get 100% experience and killing the mobs. It worked on retail for long time.
2. Is it allowed?
Wasn't the first 80 in the world forcibly leveled down for using this method because blizzard found it unacceptable?
Doesn't change the fact it worked in classic and TBC WoW. Any official staff statement about this?
The general understanding of powerleveling here on Molten is taking a lower than the appropriate for the zone level alt to a large group of mobs that are in that zone and killing them so it can gain XP. Those zones aren't instanced - they are OPEN WORLD zones. Instances on the other hand have level requirements. If the character is too low of a level to enter an instance, it simply won't let it. So yeah, power leveling is, for example, taking a level 10 alt to Icecrown and farming the mobs there. If the character is of an appropriate level for the zone/instance, it's NOT called power-leveling.
Power leveling is considered an exploit on Molten due to the fact that mobs that are a significantly higher level than the character (that's being boosted) should not yield XP to that character. At least that's the way it is on Blizzard. Here, however, high level mobs (marked by a "skull" as a level) do give XP to significantly lower level characters, which is an exploit.
So, to answer your question: It is utterly fine to run your characters through instances with a higher level alt, as long as the character is of an appropriate level for that instance. Thus, if it isn't, it won't be able to enter it, as mentioned above.