Yeah, I read it as phaedrus does; keep mentals, body is young, alter physicals. I agree on the houserules regarding LA, age stacking, traits lost and retained, etc. They all fit the 'fluff' of the spell.
Interestingly, if one can get this or last breath (SpC, 130) cheaply enough, a 1st level character need not be dragonwrought to have venerable mental stats. 500gp or 1000gp material + chameleon5*4th level spell*10gp=200gp. 700-1200gp as a 1st/2nd level character is not insignificant, but sheesh.
As long as your build doesn't hinge on your race, this is doable; die at 2nd, go to midpoint between 1st and 2nd (for reincarnate, losing, what 500xp?) get young physical stats, keep venerable mental stats. catch up soon-ish on XP. If you can get a Contingent last breath crafted, you can do it with 2500gp.