1. What level 1 are you talking about? If you are talking about OES Level 1 (http://www.flcdatacenter.com/) you should be able to extend H1B with either Level 1 or 2 based on what your job description is. You minimum salary should match or exceed that stated in DOL database for the level you apply. You can extend your H1B beyond 6th year once you have an approved I-140. You can keep extending your H1B beyond 6th year until you get your green card, provided you are with the same employer that processed your I-140.

2. Applications for H1B and gc are not compared. You are not going to fill out the same form for these two processings. You can apply for H1B extension for one level and gc for another level. But when you need to extend H1B beyond 6th year you need to sync up your levels between gc and H1B since your H1B extension is based on the gc application.

3. I am only expressing my views based on literature and similar other forums. Your best shot for getting these answered accurately is only by an immigration attorney. I suggest you to consult your lawyer that processed your H1B application, or the one that is going to process your extension, or the one that is going to assist you in applying for gc. Things have to come full circle in these matters. Don't take the answers in such forums as to be accurate. But it will give you perperpective of what others think in similar situation.

4. Good Luck!