I think I started at least 5 different parties in 1st edition from 1st level and they all managed to move on to 2nd level, 3rd level, and beyond. And I wasn't merciful.
No offence, but players got to be very good at what they did. They really understood what you could do with torches, rope, burning oil, 10' poles, iron spikes, and so forth. They got used to solving problems without resorting to magic, and they made the most of the magic that they did have.
They also had extremely high casualty rates. Players started with two 1st level characters. One of these would probably survive to higher levels. If both survived, one would probably move over to another player who had lost both characters.
They also did not believe that high levels were more fun than low levels. Quite the contrary. Most 1st editioners felt the game became lame at 9th level, and would start over or at least relegate thier PC's to secondary roles and take over thier lower level henchmen as primary characters. The most prefered levels of play were probably 3rd through 7th, and 1st level was not looked on with horror but rather with a fondness for its simplicity and tension that seemed lacking at higher levels.
I also had introduced most of the 'house rules' that became 3rd edition by the time 3rd edition came out (and cleaned up my house rules collection quite abit before thinking about it yeilded a whole new manuscript). But at first, such things had not occured to us and we played the game as written.
One of the things you are overlooking is the power of AC in a 1st edition game. AC was alot more important back then than it is now. Monsters didn't have bonuses to hit (usually). A fighter in chain and shield with 16 AC was actually fairly secure against attack. If you could find some platemail or at least enough money to buy some, could scrounge up a +1 shield serving as a tray in some orc banquet hall, and/or started with a 15 Dex (or better), then you where set.