1) When you level up, your rank will change. This will be an indication for you to go change your HP/MP
2) Please change your HP/MP yourself and adjust it to the limits it should be, don't cheat.
3) When you level up, more likely then not you will be able to make something new, you will most likely want to as your old stuff won't deal as much damage to others the same level as you as it did when you were one level previous.
4) Your level is your life. When you enter a tournament, you'll only be paired with someone who your level actually stands a chance against, so don't worry that at level 1 you'll be fighting level tens. Not gonna happen. And when Admins enter tourneys, they are reduced to post level.