LFK, if you've been doing sitting and active meditations (almost) everyday for three months, then you have a good practice. Congratulations. Regular practice is one of the six keys to success and one of the easiest to achieve but for the pop-a-pill and fix it mentality it's the one that's neglected.
The standard answer for when to progress to level II, is when you've noticed some improvements in yourself. I personally think that here is much you (and I) can learn and benefit from in level I. Remember the techniques are only a part of qigong, and the mental attitude is more important.
That said, I don't think there is harm in learning any of the levels but how much you practice they become is something you must trust yours and your master's guidance. I would say order the course, go through it and then decide how much of each you will do. Because, it's not a stop level I, now do level II material. I still do level I material most of the time. In fact, I've recently have been doing the self-concentration with an entirely different approach.
In the level III material Master Lin mentions that in SFQ you build your energy foundation like a pyramid. The large broad base in the lower dan tien, the less broad at the middle dan tien, and the peak at the upper dan tien. He says he has people rush to develop their energy to open their third eye only to find that third foundation could not support it, and so it collapses and they must begin rebuilding again.
I believe you can open your third eye at any time, than you can help people at any time, that you can support your own help at any time. However, to be more effective at any of these a solid practice (or foundation) is your best path. Since being involved in SFQ I've spoken with more and more people about their energetic and spiritual experiences and stories they've heard. Some of them are not nice stories, some of them have much fear wrapped in them. I think that if you follow Master Lin's advice of building a pyramid, you will be so wrapped in love that you will see the energy for what and where it is, and deal with it appropriately.

(working hard not to slip and say negative energy... no such thing)
As for taking the course in person or at home. It is always nice to learn directly from the master, but the home study course allows you to review the material again and again. Both would be the best. I have done both level I, and II by home study, and attended a level III retreat. And if you've read all but 50 pages of this forum, you've read quite a few of those tales. (I'm not sure everything is still here... I think much was lost when forum changed a couple years ago. I still can't find everything I know was posted using that search engine)
I can't answer number 2 but so far the classes have only been in Minesota.
I don't think there is a right or a wrong way to do the lying meditations. First I think you should be comfortable. I have two positions I typically use. Both are flat on my back, legs straight but not touching. In one my arms are like at the start of the active exercise with palms down. The other my hands rest comfortably on my torso, in a position close to forming yin and yang. I think that comfortable is good, straight spine is better and best for me will have to be what I am moved (guided) to do.
As for seeing "negative" energy around people. I know that some people deal with energy that is not healthy for me, but I don't fear it. I merely send blessing and qi that is more healthy for them.
For protection I've only come across the thumb to side of fore-finger (stop you energy from being drawn away), and the golden sphere visualization. Level II is mainly about increasing your capacity to help others.
You are perfection.
Iam2
