Question 1. What determines enemy unit experience level ?
The mission briefing booklet. For example, mission 1 normandy, under Enemy Information, Mission Details it shows experience = Line.
Question 2. I am not completely clear how to resolve hit results on multistep units. If there are 2 letters I think I replace the 3 step unit with one unit for each of the letters and a fire team for the last step.
If there is only one letter, do I flip the 3 step unit over and add one unit for the letter ?
Correct. Say you have a 3 step w/ a CP showing. One step becomes a casualty, the next step a paralyzed, (and since you cannot have a one step unit) the last step is Fire Team. If there was only one letter (say C) you'd have a 2 step reduced unit plus a casualty.