Sure, the players can have their characters act terrified, but isn't the goal of the game to elicit emotional responses in the players? The excitement of combat, the thrill of the discovery of treasure or magic items, the sense of pride of having overcome problems, and the fear of failure and death...these are feelings the players are supposed to feel. Otherwise, it's just a lame video game (or 3E or 4E or 5E,
all of which are redundant after having said "lame video game"). 
I don't want the players to tell me their characters are acting terrified. I want the players to feel terrified! Or joyous, or whatever other emotion is proper for what's going on in the game at the moment.
Life draining undead are terrifying to the players because they represent a true and actual loss to the players (ie not just the characters). In other words, getting hurt (ie taking hit points of damage) has no effect on the player. Neither does death, in that it can be easy to raise the character. AD&D is designed to allow for characters to be raised from the dead, and several spells, magic items, and other methods exist. And often, character death is the result of player mistake or bad decisions. So the player often (either directly or indirectly) does it to himself (ie his character). But when the character dies, the player is still alive. All he's lost is the investment in time developing his character, and his emotional connection to that character.
However, since there are so many ways to bring back a dead character (resurrection, raise dead, divine intervention, ring of regeneration, wishes, etc), that investment is usually not too badly risked, especially if the player has a decent DM, who will at least allow the possibility of raising the character (only shitty DMs disallow that function in the game by making it impossible - it was included for a reason).
Being petrified? No biggie. Just use flesh to stone.
But life level drains...those are terrifying to the player. Why? Several reasons. First, it represents a serious loss of large amounts of time, energy, and effort on the part of the player. The player has spent many a long hour developing the character, and life level drains essentially wipe out or eradicate those efforts. If a player spends a year working his character up from 2nd level to 4th level, then gets drained by a vampire, the player has basically lost a year of his time, effort, and energy. The vampire is in effect leeching off the life of the player as much as it is leeching off the life of the character! Granted, permanent death of a character is a loss as well, except that dying a hero's death is a sort of appropriate closure, and a risk assumed every time the PC ventures out. There is nothing heroic about level drains, and it is not the expected closure to a proper heroic career. In a real world example, we all know we have to die some day, but who wants to have a stroke and lose years of skill and ability, or get Alzheimer's and lose memories of what we once knew? These can be even more terrifying than death.
Second, life level drain is not easily fixed. It is the one of two things in the game that are not generally fixable by one simple spell (artificial aging being the other). Poisoning can be cured or slowed by several spells. Damage or injury have handfuls of spells that can alleviate the problem. Petrification can be reversed by a single mid-level spell. Curses can likewise be removed easily. Insanity, blindness, deafness...all cured easily with any one of several spells. Dismemberment can be fixed by spell or magic item.
Potions, magic items, and other things provide relief from all of the above. Healing potions are abundant, as are scrolls with healing ability.
But look at life level drains. What fixes that? Just one spell - restoration. It is the highest level priest spell (7th level). It can only be cast by a priest of 14th level or higher (a rare thing). It has a short time limit (one day per level of the priest casting it). So a drained PC usually has only 2 weeks and maybe a few extra days to locate, then travel to a priest who can cast the spell. Transportation in the AD&D world does not include jet travel, and going by horse or ship may take more than a few weeks. The priest must be willing to age himself two years by casting the spell, and be willing to perhaps die right there on the spot if he does not survive his system shock roll from the 2 years of instant aging. The recipient also ages 2 years and likewise risks dying from a failed system shock roll.
While the DMG in 2E does not list a price for restoration, we can interpret it to be more expensive than or perhaps at least equal to other spells which age the caster and/or accomplish an amazing amount of healing. Regenerate costs 20,000 gp. Limited wish costs 20,000 gp plus requires an exceptional service. A full wish costs 50,000 gp and likewise requires an exceptional service.
Since limited wish can mimic any spell of 7th level or lower, I would say that the minimum charge for casting restoration would be the same as that for a limited wish, ie 20,000 gp. Plus, the caster (if one of appropriate level can be found within the narrow time limit who is willing to artificially age and risk immediate death for casting it) must have similar (if not identical) alignment with the person requesting the restoration. Quite a high level of commitment and challenge, no?
Worse yet, restoration fixes only part of the problem. If a PC encounters a spectre or a vampire, it drains two life levels, not one. The restoration spell would only raise the character one level, not two. Each casting restores only one level.
So even after going through all that expense and extraordinary effort, even if the spell works (ie the recipient does not die from aging), he is still one level lower than he was before the vampire touched him. The player has still lost 6 months or more of his effort, time, and investment. And even if he faced a wight or something that drains one level at a time, it seems to me that the PCs tend to get hit more than once. So usually they lose more than one level at a time.
Even accounting for each PC getting hit only one time by undead such as wights, which drain only one level, how does one acquire multiple restoration spells?
If a single character gets hit by a vampire, he loses two levels. Assuming he has 40,000 gp to spend, and assuming he can find a priest of sufficient level to cast it within the prescribed time limit, and assuming the priest is willing to cast the spell twice, age 4 years, and twice risk dying from artificial aging, and assuming the character being restored survives his two system shock rolls and is willing to age 4 years...see what I mean? Not very likely in any but insane Monty Haul games with absurdly generous benefactor-priests. He's probably getting just one restoration spell cast, therefore he's still lost 1 level.
And should 3 or 4 members of the party each lose just one level, the problem is the same. How much money is there to restore each of 3 different PCs who have been drained one level apiece? Does the party have 60,000 gp handy? What about the priest? Not even an insane priest will tempt death 3 times and age himself 6 years (especially considering priests of 14th level are not exactly strapping youths!). How about alignment restrictions? If one party member is LG, the other CN, and the third N (say a druid), they need to find 3 different priests. Do they split up? Because unless they have lots of teleport without error spells, they're not gonna get each and every PC to a priest in time.
So life level drains always result in a loss to the player, moreso than the character. And therefore, players fear life drain more than anything else. Except for one of my groups of players, to whom artificial aging was the worst fate of all, but we won't go there in this post...artificial aging is my favorite because it is perhaps more difficult to fix than even life level drains, though not as detrimental to either player or character.
And yes, there are tomes which raise levels. But the PC can only use it once, so if a vampire touches him and by some miracle he gets access to a tome that restores one level, he's still lost that other level. A net loss is still a loss, alleviated though it may be.
I'm all for life level drains. Yeah, they suck. Yeah, they hurt. Yeah, they really mess things up. But for inducing true terror in players, nothing else quite reaches the level of life drains. Plus, the DM can use it to put the brakes on PCs who are advancing more quickly than he intended (perhaps he was giving out too many xp too easily). If the DM does not want an 18th level wizard who has access to wishes, and the character is 17th level and ready to hit 18th soon, one touch of a vampire will set that wizard back to 15th level, and even if the wizard obtains and survives a restoration spell, he's stuck back at 16th level and now instead of being an adventure or two away, he's a year or more of game play away from getting wishes.
Yeah, there's nothing like a good level drain!
