Andy, I think that you have broken the back of it. While a fictional character can not move 'upwards' by Level number they can be referred to by others. Real things can move downwards to all lower levels. Like Swindon can exist at all levels so as to set the plots.

For instance, with James Bond.

Bond is a fictional character in our world Level 1.

But our world has real objects inspired/referred to as being appropriate to James Bond. So while the character cannot move upwards the reference can. But James Bond could in theory move down a level to the Bookworld to interact with other characters both fictional and 'real' such as the Queen, who has moved down two levels.

This is as I understand it, and being someone who worked in accounts for a long time: E & OE