So, the experience chart you made is kind of nice and all, original poster guy, but... I dunno about making dwarves forget what they've learned by screwing up, and I'd like to maybe adjust it a bit.
1) Perhaps a 'failure' should be two different things. First, a failure to gain experience (Losing experience seems... iffy), representing the dwarf's failure to learn something, which would be represented by the adjusted flavor of chart I'm going to throw out shortly, and secondly, an actual failure - botching the project, producing an object of inferior quality, and similarly affecting experience in some way - hard to say what way that should be though, as one is generally supposed to learn from their mistakes.
This second variant of failure should probably be based on skill level too - A dabbler with no master/teacher should fail to produce any particularly usable items at first if he has no idea what he's doing, whereas a grand master would rarely, if ever, screw up.
2) The 'failure to gain experience' chart. I'm thinking maybe it could be less of a straight line and more of a ... bell shape. So, dwarves would learn rather easily in the middle skill level range, but have trouble getting into a profession without teaching/books and similarly have difficulty improving their art past a certain point without drastic measures. I'm not sure where being mentored/reading about a skill would fall on this, though.