I have seen this situation on high school and college level both. Clock is running,2:00 remaing Team O(Team D has no times out) has the ball and is called for delay of game. The penalty is marked off, then then the referee wides the clock and the game clock starts again. What would keep Team O who has the ball at mid field, from just letting the time run out., they would never has to run another play, just keep getting delay of game penalties.

Rule 3 Section 6 Art.3 States when a team attempts to conserve or consume time illegally, the referee shall order the clock started or stopped. In this case the Referee would certainly order the clock stopped.

Not sure about NCAA, but for high school rules its even more simple than that: "The clock shall start with the snap...if the clock was stopped because the penalty for a delay of game foul is accepted." (3-4-3i) So if the 25-second count is allowed to expire the referee does not have to invoke 3-6-3 because the clock will not start until the snap anyway. 3-6-3 is designed to handle other situations such as a player who throws an illegal forward pass with the intent of (illegally) conserving time, or a player who holds the tackled runner down in an attempt to consume time.

Would a receiver who caught a pass for 15yds on 1/10 and then takes a knee to kill the play be considered an illegal conservation of time? I've seen some pretty smart players do this.

No, because he is not breaking any rule to illegally consume time. In NF or NCAA rules the clock would stop anyway based on your example. However, by downing himself he knows that the clock will start on the RFP and will avoid the chance he will fumble while being tackled.

No, this is not prohibited by rule...its a perfectly legal, smart play. Just the opposite happens all the time: the QB takes a knee to consume time.

I believe you're mistaken. The clock is not restarted at a delay of game penalty.

Saw it again last night at a high school JV game. after a delay of game penalty the referee started the clock again.

Smoke, Here is your reference for high school,
Rule Book: page 33
3-4-3i
ART. 3 . . . The clock shall start with the snap or when any free kick is touched, other than first touching by K, if the clock was stopped because:
i. The penalty for a delay of game foul is accepted.

Simplified Book: page 32
3-4-3i If the penalty is accepted for a delay-of-game foul, the clock shall start with the snap. A number of specific situations constitute delay of game; however, any conduct which unduly prolongs the game is delay.