I want to continue with something related to the post on levels. I've mentioned some things like "0-level humans" and "NPC classes", but haven't really gone into detail, nor have I suggested how I'd deal with the issues of NPC ability.
The LBBs do not actually use the phrase "0-level", to my knowledge, although there is a reference to "normal men", which covers basic bandits, pirates, and nomads. They all have 1 HD and fight about the same as any other 1 HD monster. Their leaders may be exceptional, and are treated as Fighters (or occasionally other classes) of higher level. Less rugged sorts of NPCs, like the innkeeper or stable boy, aren't detailed, so most GMs go with either 1 HD or a flat 1 or 2 hp.
There is one element in the LBBs which I think influenced the drift towards interpreting "level" as professional competence: fighters getting the level title "Lord" at 9th level and attracting followers if they build a stronghold or castle. Almost everyone inverted that statement, assuming that people who owned castles must therefore themselves be 9th level or higher. I don't think that's what's required by the rules at all: anyone with the money could build a castle, and with good reaction rolls or outright trickery or magic, they might even be able to get recognition as the local noble. What the original rules are saying, in my view, is simply that at 9th level, characters are so far above normal men that they are recognized as the equivalent of lords or high priests, regardless of their birth or political connections. There's nothing in the rules that says unexceptional humans should have more than 1 HD or be treated as higher than 1st level on the basis of politics, wealth, or skill in a profession.
Which leads to the topic of NPC classes. There were several articles in The Dragon that added classes meant to beef up merchants, smiths, sages, and other non-adventurous sorts. Clearly, this is the result of another inversion: if higher level characters are more competent in their abilities, then highly-competent characters must likewise be high level. GMs felt there was no other way to indicate the difference between an ordinary craftsman and the most exceptional craftsman in the kingdom. Most of these fell by the wayside, adopted only by small groups, and although there is a description of sage abilities in the DMG, AD&D 1e in general did not make NPC classes official; by the time of 3e, however, a couple NPC classes (noble, expert) became core.
If I don't approve of making NPCs high level merely because they are experts in their field, how would I handle them?
Obviously, as far as skill level is concerned, I'd go with the backgrounds from Blanc that I've been discussing. They would all be 1 HD. This goes not only for the lowly torchbearer, but also for the sybaritic noble or that noble's armed guards. All 1 HD, no special class abilities, but they might have other abilities (talents.)
Occasionally, I'd toss in a 1st level or higher NPC of some class. I'd probably go no higher than 3rd or 4th level for new* NPCs who aren't officially monsters/villains. Yes, the necromancer who must be stopped before he raises an army of undead to take the local baron's castle by force is probably 7th or 8th level, nut otherwise, magic-users -- and mighty heroes -- of 5th level or higher are rare. The king is maybe 4th level, if he was an honest-to-gods hero before becoming king, but may otherwise just be another lowly human; social power does not equal character level, either.
* I say "new NPCs", because I'd probably make a random roll for recurring NPCs, particularly for rivals, to see if they've increased their level since last encountered. Maybe roll 2d6, increase their level on doubles or if the high roll is less than the number of years since last encountered.
But that doesn't mean that these people are push-overs. For example, consider the high-priest of the local (non-evil) temple; probably not actually high level, but if I'm going with active gods in the campaign, they may have the power equivalent to a 9th-level cleric while inside their temple, working the will of their patron deity. This isn't their level, however, but the level bestowed upon the office of high priest.
This not only keeps power escalation in check and maintains the specialness of the PCs, but it also gives the high-priest (or that 0-level king) a reason to hire PCs: player characters are true extraordinary individuals, able to do what they cannot.