Yup, the online in general needs fixing. This just happened to me:

Had done 7 levels in sequence, had stocked up 6 or so lives, everything perfect. When I went to enter the next stage, it pulled me out of my hosted game and thrust me into a B-route stage ~10 levels above my character - nerfing my extra lives back down to 2 and confusing the shit out of me for the first 30 seconds or so in the process. Ended up getting killed almost immediately, not that it mattered, because the connection it forced me into was unstable, and after a minute or so of broken pauses, I was faced with 'network error' and kicked back to town, losing all of my exp in the process.

I really like this game, but that is seriously bullshit. They need to do one or more of a few things:

1) If you're the host, allow you to decide whether or not to stay in that role, allowing you to control your own progress, even when playing online

2) Make life points carry over even if you decide to be matched up with others halfway through an adventure

3) Prioritize stable matchmaking over the need to match anyone on the network at all costs

4) Figure out a way to award exp even in the event of a network drop. If they can give you your items, why not your exp?