Viana do Castelo
I've been playing it like this.
You start with the gray peg underneath the first SPECIAL letter you have. So if I start with E and A, I would put the gray peg under the E ...
No, you start with the "gray peg in the hole to the left of the XP track."
... and advance it one space for every experience point I gained (so if I killed a level 2 enemy I would move the gray peg to I).
Then, I level up and gain the P letter. Would I advance the gray token directly to P or would I continue going one space at a time from the far left?
Or do I have it wrong?
For each XP you gain you move the peg through the SPECIAL tokens you have.
In your case, if you have E and A, and gain 2 XP, you move the peg until A - you still do not level up. You need 1 more XP to level up, because now the peg would move from E to the space at the left of the XP track.