There would be no harm in doing level 2, but I only mentioned that as I am finding an exercise from it particularly useful to me. In terms of healing yourself Level 1 is incredibly powerful, maybe it's best to stick to Level 1 for now. With a bit of persistence you'll be wowed by the healings that can accompany it. Go through each exercise and really observe how your body feels.
Reading your post again it sounds as if your main focus right now should be clearing the heat and moving the Liver energy, so if bending the knees more makes your practice uncomfortable or off putting then just stand comfortably and practice :-) certainly moving the stagnant Liver qi will help hugely with the fatigue you're experiencing.
Be vigilant with the herbs and acupuncture, I've cleared a LOT of heat from my body with both of those and it really turned my life around.
all the best with your practice and healing :-)
