20th-CENTURY MERITOCRAT: No, the best person for the job should be picked. Of course, commanders should be chosen on leadership ability, not fighting ability, so if this person was chosen based on that, it's OK, but it doesn't sound like it.
RENAISSANCE PLOTTER: She's loyal to you, that's all that matters. If she's more competent but working against you that's worse than simply being incompetent. Just make sure the people under her respect her, and you. She doesn't have to be loved or anything.
FEUDAL WARLORD: Look, I want someone who has my back in a fight. I know this person, she's loyal, that's it.
BUREAUCRAT OF THE MIDDLE KINGDOM: She didn't score well on the exams, eh? Well, this is somewhat irregular, but I could inquire of my superior...
Basically, (a) character level doesn't have to correspond perfectly with rank--that's a convention of video games that have to have a set of enemies with ascending difficulty and (b) in the premodern era, rank depended, as haakon1 and Ancalagon said, on family connections, military service, and personal relationships. You want someone you can trust rather than necessarily the best person for the job--a competent but disloyal underling is more dangerous than an incompetent and disloyal one. After all, the result of playing politics badly in this time period may not merely be job loss or demotion, but death!
The idea of some quantified measure of 'merit' such as a character level is a creation of the modern era's testing regime...which were inspired by the British and ultimately imperial Chinese civil service exams, and assumes a bureaucracy whose survival is more important than any individual. So unless your fantasy world is based on imperial China, your Baron is justified.