Almost any caster can figure out their "level" quite easily, although they likely won't consider it such - assuming they've got ranks in Spellcraft.
From the journal of Ranth Norzor, 13th head of the Wizards Guild of Southshire, east district:
"Of those young Wizards who could not hold on to a Detect Magic spell for at least three minutes, none were found that could also master See Invisibility. Of those young Wizards who could manage See Invisibility, all could maintain Detect Magic for at least three minutes when pressed. Of those who could manage a Tongues spell, all could maintain Detect Magic for at least five minutes when pressed. I have come to the conclusion that the lowly Detect Magic spell is a remarkably useful tool for measuring the ability of a Wizard; a simple exercise with a water clock gave me a surprisingly reliable indicator of what level of skill the person had with the arcane arts, and which other spells they were likely to be able to manage."
Other types of classes would be trickier - but essentially any caster that has enough in their primary casting attribute to get their highest-level spell can figure it out quite easily... and will do so of necessity, to an extent, due to the costs involved in making scrolls.
I think this is an excellent post because it describes the elephant in the room. You point out something that seems almost self-evident:
Almost any caster can figure out their "level" quite easily although they likely won't consider it such
But why not? So why wouldn't a caster describe it as a level or tier or order as that is the most accurate way to describe it? I mean, Wizards in particular are one of the most didactic classes why wouldn't they use precise language to describe their mastery of magic? As you point out, the cost of making scrolls is a 50ft banner that says, "You are now level X, please pay Y amount to make the scroll."
It is quite fascinating for me to read the responses and see that there seems to such consensus that despite magic working in "levels" and everyone agreeing that Wizards would have figured that out, nobody wants the Wizards to think of it as such. It's not like magic was invented just before one's campaign. Wizards have been wrestling with the art of magic for eons, attempting to learn its secrets and master it through sheer force of intellect. Not one of them would decide to simply describe things in levels...despite their understanding that's exactly how magic works even if they don't understand why it works?
Really?
People really think Wizards wouldn't say, I'm a 1st Order, or 3rd Order Wizard? I certainly can understand that they might not use the exact word "level" but nobody thinks that they wouldn't have strict classifications for their level of ability...given that the level model describes it perfectly?
For a babarian, or shaman, where we can insist they don't have a literal school to train at, I can see how the practicers of the profession would not think of themselves in such rigid terms. But Wizards? They would eat that up. They would feast on anything that allowed them to neatly organize things.
One of the questions that naturally comes up for me is whether D&D originally intended for the in-character classes to recognize their advancement occured in levels. In 1e, characters literally had to go train based on the average letter grade the DM gave them over their adventures (seriously). In 3.x it's not clear to me what the leveling process is. Does 3.5 take any definitive stance on this subject?
Good post, by the way.