You can beat even high stakes with just level 3 thinking. (Ie, what range does villain think I'm putting him on), anything more than level 3/4 is just a coinflip as to whether or not you have gone one level too far/short (both of which often yield the same results.

You are definatley right about the level 1a thinkers although I think it's really level 0.5 - I like to call them weak/tight donators (which is exactly what they are in short-handed LHE). You cannot be pessimistic or optimistic in poker - realism is what gets the money. If you find yourself on level 0.5 thinking, try to determine what hands villain could have that you are ahead of, then determine what hands he could have that have you beat, then use this information to make an educated guess at how often you are behind/ahead, make your play, and re-evaluate on the next street.

Always remember - you can't use level 3 thinking unless your opponent is on at least level 2, you can't use level 4 unless villain is on atleast level 3 etc etc. Over-thinking a hand against someone who isn't thinking at all can lead to disaster.