Well im unsure about toplevel but it does seem to affect leyering of frames (at least graphical parts as backdrops and textures...) as for flaging to mouse interaction both my frames had OnEnter events and seting toplevel on one to true actually didn't change a thing... still one that was loaded earlier was geting mouse event...
As for frame levels.. yah my mistake here, i didn't test how it acts with parent thing...
But it makes sense to me. It just do some things for you so you don't have to set it manualy everytime. Default value set as parent FrameLevel+1 (if parent exists) or 0 (if there isnt parent declared) will assure that child frame is above parent frame, and since default frameStrata for frame is same as parent frame it makes sense (So you don't need to set frameLevel and frameStrata for your frames everytime manualy).
As for that it isn't affected by frameStrata... Well i think that it doesn't metter and they knew that and didn't bother to implement more complex code.
It doesn't metter because FrameLevel comes in play mainly when you have many frames in same spot with same frameStrata and you want to sort them.
Other than that it don't affect anything since frame with higher frameStrata will show above frame with lower one even if lower one has FrameLevel set as 100 or more.
Thank you very much for corrections
i will edit first post a bit..