Yeah, it can happen but the higher level players normally don't screw with the lower level players.  If a level 60 kills a level 10, they get an unhonorable kill.  If you get enough unhonorable kills your faction will turn on you and you will be attacked on sight by everyone.
This isn't accurate. The only way to earn a dishonorable kill is to kill NPCs that "cons grey" to you (meaning you're 11+ levels greater than they are). And at no point will you be attacked by NPCs or PCs of your own faction, regardless of dishonorable kills. All a dishonorable kill does is take away honor from your earned honor for the week. Nothing more, nothing less.
Killing another player, regardless of the level difference will never result in a dishonorable kill. However, you will not get any honor for killing another player 11+ levels lower than you. You'll just get a smile out of it for making that Night Elf suffer while he's trying to farm quest items in the Wetlands.
I think originally Blizzard intended for the honor system to be more robust, but it didn't pan out as they planned. Instead, accruing honor allows you to go up in ranks similar to a military hierarchy and will allow you to purchase items from provisioners based off of your earned rank. The actual system of how to earn rank is fairly complex and can require tremendous amounts of time in order to reach the upper echelons, but the rewards are definitely worth it.
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