I honestly dont think we need to overcomplicate by having specific power levels. We never bothered with them way back when. We all simply assumed we were roughly the same level and went from there. Most of the old RPG was involving training anyway. By the time any of the big bads came a round we had progressed to a stage where everyone was confident about each other writing even fights and knowing not to power play.
We didnt have everyone going SSJ at the same time either. It was done under circumstance, not just 'oh your above the correct level now, you have earned SSJ'. If anything thats the Vegeta mindset and look what happened to that. It wasnt his power level, it was his desperation and obsession to beat Goku.
Of course we just have to be sensible. Dont want to see anyone going SSJ cos theyre upset that the store is out of cheezy poofs.
Blade, its not a case of stifling. Its a case of making the story interesting without the quick flash in the pan "WAAAAAAAGGGGHHHH I CAN NUKE WHOLE FOREVERS!". Dragonball was more about the story than the action. The action was awesome but thats why they spent 3 episodes charging up for a fight, to build the tension of the story.
So officially id say....
1) Future but with some changes to history. None of the Z-Fighters are alive but all the Canon of Z still played out. Vegeta lived on earth, had kids with Bulma etc. However, Planet Vegeta was not destroyed and Saiyans still inhabit the universe. Vegeta however decreed that Earth is off-limits to any hostile Saiyan force.
2) Saiyan Descendants as well as some Purebloods that know more than theyre letting on. Just cos Vegeta said no Saiyans can attack earth doesnt mean some cant live there. Not to mention its a planet that Produced the majority of the Super Saiyans, (Well, Gohan, Trunks and Goten) so some may see it as a pilgrimage or even a training ground in the hopes that they can reach SSJ too. SSJ will come into it but not untill much later and for a Valid reason. Not just "well he can do it!"
3) Ignored. Specific power levels over complicate things and to me seems more of a bragging right. If were all good enough writers (and the people posting in this thread are) then we should be able to organise and self-limit ourselves to avoid power-playing. The only 'levels' that would outclass fighters are the SSJ's etc. Remember not everyone in the Show were even usefull fighters by the end of it. Krillin and Yamcha were outclassed most of the time. However its that will to fight despite their disadvantage that made the charachter. They had to fight to defend what they loved without knowing they can up their game to a whole new level as soon as it gets Dicey.
4) If its future, sure. Though remember that the Androids were stronger than SSJ. 18 kicked Vegeta's ass and snapped his arm with a single kick. There would have to be limits to stop them dominating the early RPG.