you can't group with friends or guildies because they're in a higher level zone or dungeon,
The problem then isn't levels; it's a power differential. Basically, you have exactly the same problem at "end game": level 60 people in "levelling greens" will have difficulty grouping with their guildies in Blackwing Lair. Theoretically, they can, but they die. In the same way that they can group at 40 and go to Winterspring, but they die if the monster look at you funny.
Of course, your friends can come and run you thru Scholomance for fast loot, but, curiously, they're not allowed to group with you in Tanaris for fast XP: Powerlevelling is not allowed, but power-"stuffing" is.
So what does this tells us? That the problem to solve isn't a problem of levelling time, but a problem of reducing power differentials, and reducing the barriers to content. Sure, you can do that by making levels fly. You can also do that by flattening the power curve and eliminating barriers.
Right now, a level means something like an extra 5% crit per level (on lower critters), and an extra +3% hit on about everything, and some more dmg (and the reverse; monsters hit you less, and their base dmg suffer relative to you. Oh, and I'm not talking about WoW post-80 levelling where each level adds 40% more HP and 10% dmg and whatnot). It's so much power that you need to trivialize xp gained fast. Instead, you can simply make levels give you some small amount of stats, have level differential meaningless (no level delta-linked boni/mali), and presto: you can group across a wide range of levels, which opens up a lot of potential content, reduce barriers, etc, etc.
The problem is then psychological: you DO have to retrain your players, because they expect levels to provide enormous amount of power, they expect needing to be able to group only on a very narrow range, and to have one or maybe two zones available for levelling. If you tell them they can level in 12 different zones ranging from easy to somewhat challenging and group with essentially anyone despite not being max level, they suddenly become lost. OMG! WHAT SHALL I DO?
(note that, by reducing the power curve from levels, I'm essentially "soft-removing" levels. Levels still exist, but they matter less)