Sorry for the lv1 char vs the lv99 guards. I like extreme examples to demonstrate general concepts.
When I read your stuff I think of this: lv99 villager: I give you the epic quest to kill a lv2 wolf. lv1char: Why? You could kill it by just looking at it. lv99 villager: Because I could crush you like a fly. But I prefer to see you suffering. This is complete nonsense, but players would not commit genocide anymore
Exactly :p All villagers would be 1st level, because that's what they are - untrained villagers. Levels are just a representation of power, not the power itself. That's why 99 lvl villagers giving you quests to kill lvl 2 wolves break immersion :p