Anyway, the dwarves would get rewarded with the ability to wear/wield new armor/equipment and (eventually, once Toady brings it to the game) use better spells. After all, don't you think that Urist McLegendarySwordsDwarf should have better armor than Urist McRecruit? It could improve the balance of the game by forcing the player to focus on the non-legendary dwarves. The reward for the player, of course, is the peace of mind that they will recieve when their hard work pays off. It also would lead to some interesting forum posts. Example-
Why couldn't the non-legendary dwarves wear that same armor? "Oh, sorry Urist, you've only got 24,975 XP, you can't wear this steel breastplate yet."
My legendary Swordsdwarf wields the Unholy Longsword of Armok, It is encrusted with an enchanted Admantine orb, which turns a bloodier red for every enemy that steps in his way. No enemy has seen, nor can remember, his face because any foe who looks at him never lives to tell the tale. He has been consumed by darkness and takes out his vengeance on those that have murdered his wife and children. Oh yeah- Did I mention that he raises a colony of bees in his spare time?
...Well, the bee-raising seems kinda random, unless the dwarf can actually us his beekeeping skills in combat somehow. "Come out little bees, I have a new hive for you! It's over there, behind that scourge."
I have something that might be counterintuitive, but I'll see what you think-
When a Dwarf gains legendary status, keep the dwarf from changing jobs/doing other tasks. It would make for an interesting game dynamic because it would force the player to consider the jobs that they are choosing for their dwarves more carefully (After all, do you REALLY want a bunch of Dwarves that can only mine, but can't do anythng else?). I know... Bad idea. Just disregard this part, okay?
...Familiar with the backspace key? Or are you just tired? I type stupid stuff when I'm tired.