Damage & defense penalties exist but they are slight. Light levels are simplified now so that increments of 10 are how they are decided. 311-320 is basically 31, 301-310 is 30, & 291-300 is 29.

Its like this... 291-300 is the same level. Same with 301-310. If your a 310 and you see a 311, their name will be a color to indicate that they are of a higher light value than you. (I don't know the exact color because I am color blind). But once you hit 311, it would be normal. So.... 291-300 is the same. 301-310 is the same. Noticed this in hard mode when it first released. I was caught between being at 312 and using decent weapons, or.being a 310 and using things that seemed would be more helpful. At 312, the ogres names were as they always were, but once I dropped to 310 they were darker and bolder names. Pretty sure the same applies for PvP with levels enabled. Hope that helps!

I went flawless being 294 using icebreaker. My level was 314 but with icebreaker 294.

I believe your attack rating will matter still, not just your light level. As for how your level will affect you, I just know that facing people around 310 as a 300 made a negligible difference as far as I could tell. I'm sure at 290 there'd be a difference, but it might be about the same as 33 vs 34 during Year One.

Bunp