I have no problem with Titans retaining levels in principle, I have a problem with current implementation, when the Titan just respawns with no explanation whatsoever, or mechanism how would a dead crew from the lost Titan appear in the new one.
The solution to that? Escape Pods.
When level x Titan goes down, it releases x - 1 escape pods (since the first level is free). These would be fast heavily armored frigate sized craft (also Jump interference immune after you research it), which immidiately start to rush to your nearest colonised planet. How many of them manage to get there would determine the additional levels of the new Titan. Titans owner would have to cover their escape, and the other player would have to chase them and try to take out as much as possible before they arrive at their destination.
It solves the current absurdity of the unexplained Titan respawns with plausible mechanism, and adds a new interesting gameplay mechanic.