I remember it being especially bizarre because it basically means going through a large portion of the game with a more or less useless character soaking up xp, after which you either have a slightly less useless underlevelled character or one that's brokenly OP depending on how you planned out the combo. And if you dual class too late you just never get to that point and it's all drawback no benefit.

In AD&D, you still had access to the abilities of your retired classes, but if you used them you had experience penalties (if you use them in an encounter, you gain no experience for that encounter and your experience for the entire adventure is halved) . The reason was that you were supposed to be learning to do things a new way, and if you fell back to the old way, you weren’t pushing yourself anymore. From the AD&D PHB, under “Dual-Class Benefits and Restrictions”:

This is not to imply that a dual-class human forgets every-thing he knew before; he still has, at his fingertips, all the know-ledge, abilities, and proficiencies of his old class. But if he uses any of his previous class’s abilities during an encounter, he earns no experience for that encounter and only half experi-ence for the adventure.

The paragraph goes on to explain what’s restricted (everything but HD and hit points), then ends with:

(The character is trying to learn new ways to do things; by slipping back to his old meth-ods, he has set back his learning in his new character class.)