I personally believe that it is nearly irrelevant how NPC's compare to each other in power and levels. All that matters is how the NPC's compare to the PC's.
Yes, and from the relationships PC <> A and PC <> B, you also define the relationship A <> B.
My reasoning behind it is to judge how the mechanical stats of the PCs relates to their influence within the setting.
There is this really bad habit of making all kings and queens 18th level fighters and wizards. Something I find myself constantly slipping into.
But look at the political leaders of the world today. Their power is purely political and social and the reason you can't just walk up to the President of the United States and stab him dead is not his awesome kung-fu skills and his magic swords on his belt. It's because he's surrounded by a whole bunch of guys with awesome kung-fu skills, ballistic vests, handguns and all kinds of electronic surveilance equipment. Okay, Putin would still spank my ass in a one on one, even if I had a knife and he does not, but that's beside the point. ^^
So assumed the party of four 5th level PCs is lead to the lord of the local duchy and they encounter something like this:
[sblock]
[/sblock]
A cool boss fight for the party would be a 7th level NPC, but would that really be appropriate here? From the look of it, if she's alone on the street at night and two guys with knives attack her, she's probably very dead. Even if she does happen to have a black belt in Judo and catch them by suprise, she's still in very serious danger. So I would make her a 2nd or maybe 3rd level expert, not a 7th level rogue or sorcerer.
And that means if the PCs would want to kill her, and I want to make it a big fight, then the fight would be with her bodyguard, which may very well be four fighters of 3rd or 4th level, making a nice EL 7 fight.
On the other hand, assuming the PCs are 8th level and walk into the throne room with full armor and weapons, they practically have both the duchess plus her four bodyguards, and all the other 1st and 2nd level retainers as hostages, like the Joker on that fancy upper class party.
[sblock]
[/sblock]
AD&D seems to work on a similar logic, but 3rd Edition often makes uses of the entire level range, which makes the idea that the average city guardsmen is a 1st level warrior just rediculous. As 12th level characters, you can take the entire guard at once and only really have to worry about the captain. When the guards come to arrest you, they don't have any leverage to make you do anything they say.