I kept on playing to the end of the demo after making that comment actually! I think it's actually a core design issue how much progress slows down starting at level 4. I don't feel that someone should have to get so many of the upgrades and achievements just to level up. If it were up to me, I might tie experience to the main activity of the game (ie, using abilities and combos), and stretch out the amount of experience needed to level up. Like how in RPG's you usually gain most of your experience from killing monsters, plus bonus amounts from doing quests.
The lag was happening at all times, not in spikes. I was on the lowest of low end computer at the time -- I'm on my midrange PC now and it's running smoothly, so honestly you probably don't have to worry about it.