1) Yes, you can buy a chalice of fire w/o Level 4 in Knowledge of Fire.
2) You get the ruby card no matter what your level of fire is.
3) You don't have to convert it.
The only time you have to convert cards to dust are when you use the fairies track (which gives you two cards). Not when you get cards from any other method. I think that's the source of your confusion.
In particular, you only have to convert cards to dust from the Knowledge of the 9 Sages if you have no way of holding that type of energy. If you get ruby cards from Knowledge of the 9 Sages and you have a Chalice of Fire, you can keep them as ruby cards even if you don't have any rubies.