CapnZapp
Legend
I've looked into this. I had a PC Bar/War in SKT who got the ring version at 5th when she could use it, then had to make hard choices later on when she became a 7th level warlock.
The answer is: no, the warlock cannot pretend that his 4th/5th level slots are 3rd or less.
Check out all the rules on slots and how they relate to casting spells. When you cast a 1st level spell using a 5th level slot then that spell is a 5th level spell.
A 7th level warlock doesn't have any 3rd level slots. He can't cast spells into the Ioun Stone using his warlock slots.
That's the RAW. You can houserule it differently, and it may be a very reasonable houserule to make, but you didn't post this thread to ask if you can houserule it.
The OP didn't ask for the raw, he asked for what DM's did.
Post #2 already provided the answer per the rules.
We're now discussing whether is is unreasonable and, if so, what to do about it.
