This would feel really annoying. You’re ripping away all of their agency and punishing them for the sake of your narrative rather than for something they did.

If you want to depower them but also communicate to the players it isn’t permanent maybe give them a penalty when rolling for skills during the first session in hell as a way to represent amnesia or being in a foggy state. As their memories return give them their skills back by lightening and then removing the penalty. One session of this will novel, two or more will be tedious.

You can strip them of current gear if it’s communicated that they will get it back once they leave hell. A demon explains their spirits were ripped away from their mortal shells that still exist back wherever they were or something. When the players end this adventure they go back to their actual bodies or whatever. Don’t permanently just take stuff from players in a way beyond their control.

It's not a dick DM move as much as a lazy move. But it might feel like a dick DM move to some of them.

If the idea is to make them weaker, give them a long-lasting debuff rather than removing levels. 50% HP, -4 to attack rolls, etc. Removing levels requires a lot of work on the player's part, and feels like it takes the game backwards rather than forwards. Giving them a debuff that they have to work to restore, on the other hand, feels like there's a path forward to advance towards.

dropping character level sounds like a bad call. Metroid the player's gear, but not their ability to interact with the world.

As a player I would find it annoying. I now have to redo my character based on lvl1

On the other hand you could treat it as a story gimmick. start all the players at the target lol for the game then have them defeated in fight 1.

The aim is now to regain their abilities through the course of the story.

If it's really mostly about the one magic item, I suggest a different course of action entirely:

Pull the player aside. Tell them it has to be weakened for now, but give them a longer term quest to make it better. Most players will love the extra involvement more than overpowering the rest of the group.

I would personally HATE this. Moreso the levels than the gear. Maybe a single session or dungeon that I know is going to be short, but if I had to regain those levels I'd contemplate leaving the campaign.

why did they lose their levels? Did they get amnesia and forget how to fight or spell or such?

There are a few general problems with the idea overall. It's possible to execute them in an enjoyable way, but a few of your ideas are considered "Do-Not's" for inexperienced DM's.

No-win situations aren't fun. If you're planning on running a whole combat where the party has no chance of winning, it's likely they will be frustrated. It removes character agency, and makes all of their decisions and actions meaningless.

You're better off just starting the session where you want, or forcing the scenario early in a different way, than letting them think their actions will affect the narrative when they won't. . It's fine to send them to hell and not give them a chance to avoid it, just don't make them think that they could have, if that makes sense. It's about expectations, if you manage them well, you'll eliminate a lot of disappointment

Don't take away levels, period. If you want to hinder them for some reason, make the class features themselves unreliable. The Paladin's smites don't work in Hell, his god has no power here. Devils resist fire, and have resistance to weapons, etc.

As far as taking their gear, that's not always a bad idea, but you'll get mixed opinions on it. If you do it, make sure they can get it back relatively quick. Don't have them fighting with rocks and sticks for multiple sessions. Maybe one of their captors is looking to escape too, or overthrow the overlord and will get the party's gear if they help. That gives them a choice to make, and you get to throw in some unintended consequences.

If your main concern is on overpowered magic item, my advice is to let it ride. It won't be overpowered for long, and as DM you can always tinker with monster number, HP, resists to counter it. Again, it's a feel-bad moment for a player when you take their cool toys. If it's very disruptive for your game, or you're worried about party balance, then just talk to the player and say you need to nerf it some. You can reduce it's charges or lower the damage dice. Basically anything is preferable to saying "this item is too strong you can't use it anymore".

Hopefully some of that was coherent and useful, but good luck with your game. Hope everyone has fun.

I think it'd be a pretty dick DM move. I'd hate it. Gear comes and goes, but when I was a player I'd spend entire weeks planning how I would minmax my builds over the next levels. Getting sent back to square one on that would feel terrible. I get that you've only just started your campaign, so maybe your players aren't that attached to their characters, but my players would probably still scream at me if I tried to pull something similar on them.

I'd make sure they know something like this is going to happen before they even do character creation or begin the campaign. This absolutely isn't something that should come as a surprise to the players mid-campaign. Many character concepts could be completely ruined by being de-levelled, and they need to be able to plan for playing their character from level 1. It should be the case that the higher level play that precedes the delevelling is a "flash forward", ie. They should know it's not the character they should expect to play.

If you tell people you are starting a campaign at level 5 and then they show up and 2 or 3 sessions in you're like "sike! you're actually starting at level 1!" ... Well, personally I'd quit that campaign if I was a player. And not just because I think level 1 is extremely unfun.

supposed-to-die battle

Never plays well in a collaborative game. The players will do something you don’t expect, you’ll try to force it anyway, and everyone will be pissed off.

revert to level 1

I’d probably quit the campaign.

Seriously, don’t do this. It works in video games, but not a collaborative storytelling game. Find some other way to get them to the hells, such as enticing them with a quest and portal. Any plot that revolves around players losing a specific battle or doing some specific action is bound to fail.

It's not a terrible idea if executed well, but I wouldn't do it longer than 1 session, or partway into the second if you hint after the first one that they are close to getting their old power back so they don't spend the time between the first and second session grumbling.

If you want to put them in hell, just put them into a water level a la Zelda. All their abilities prob won't work as well and would require creative thinking from you and them to see how to survive.

It's too much agency taken away from payers for my tastes. Now if you can find a way to make it their choice, that's potentially different - even if you do so in a trolley problem sort of way to prod them toward the reset.

I'd see it as a fun way to respec as long as I'm choosing to do it.

If it's a single magic item that's being a pain in the ass talk with the player out of the game. Say that you messed up giving them a staff of fire and ask them to change it. It should be a discussion and just change it without any note in game.

Also make sure you set some rarity guidelines. A very rare item is a tier 3 item. Don't throw those items around unless their is a story reason why. Like they stole it from a powerful force who is after them etc. Think frodo in the Lord of the Rings

Realistically in game if the word got around low level party is showing off their super rare item everyone nasty would just try to steal it. That isn't fun to play unless you explicitly signed up for it

I'd take their stuff, but if they can get back, give it back to them. as far as de-leveling? eh.... ok here's a one off offer folks: anyone who wants to respec as a level 4 can 'sacrifice a level' to be 'reborn'.