Very, very few of the elements of level actually apply to regular people in any meaningful fashion. As a "world building" mechanic, levels leave a lot to be desired.
HP and Thaco wouldn't apply... but things like skills and spell-use could. If the only choice is the current 3.5/Pathfinder NPC classes then I agree they leave a huge amount to be desired and I'm inclined to just skip them. An easy fix would be to simply allow for "non-adventuring levels" that, for example, grant everything except to hit bonuses, hit points, and good concentration rolls for spell casters. This would give an easy mechanic for statting up that cleric who spent their whole life in the temple (level 2 never adventured cleric, mostly healing spells, with a few divinations, 8hp) or the wizard who went on one-adventure and retired to his tower and became a famous researcher (level 9 wizard, two levels adventuring, necromancy and fire spells, 10hp). The level mechanic immediately gives the relative spell power and skill levels. For the more mundane craftsmen or the like the level would also give a rough idea of the skill level (level 3 blacksmith, militia training, tall and large, has intimidate, 9hp). Of course you could just use the skill points, but the level has a nice comfortable feel.
How did they level? They aren't adventurers, they trained or worked at things that forced them to meaningfully improve and this is the level they ended up at. So, instead of doing mental gymnastics to justify XP, just use target demographics and what seems reasonable. (If the commoner just kept doing the same thing over the years then there is no reason he would ever level. If the blacksmith had no drive, he'd never advance either in spite of the countless hours he put in making nails.)
Why no extra HP or to hit bonuses? Extra HP beyond your initial size and health are what you get from adventuring (being the action hero as opposed to the extra). To hit bonuses come from actually being exposed to real combat. (Being good at the firing range might doesn't mean squat when you're wetting yourself because the "target" is shooting arrows at you for a change.)
So... I don't think I've ever fully statted up a "mundane NPC" (at least not in recent memory) and I'm not a fan of the 3.5/PF NPC classes. But I think having a decent NPC class could personally help me with my world building when I get in one of those moods where I worry about a lack of pseudo-internal consistancy (how does a town constable compare to a 1st level fighter or thief in ability; if the town turns out to confront the kobold hoard, how ugly would it be; are all my town guards tougher now just because the party is higher level?). Not so that I can give everyone full stat blocks, but so I can have a nice short-hand, like I used in the first paragraph paragraph, that does the job for me most of the time. And, in those rare cases where I might need to, I could do a full statting pretty quickly.
[This does make me try to recall the classic early adventurers... did all of the NPCs in things like B2 have full stat blocks?]