Whenever you want to, just tell me you're spending the Hero Points to get the boon, then wait for my reply. Here's an example.
[sblock=Sample 1]
Player's Post
ooc: I spend 3 Hero Points in order to gain a level.
DM's Post
ooc: go ahead and level up!
[/sblock]
[sblock=Sample 2]
Player's Post
ooc: I spend 5 Hero Points in order to talk to a god. bring Munsu out for me.
DM's Post
"Time seems to slow down, blah, blah, blah, and Munsu appears before you."
Player's Post
ooc: Sweet.
[/sblock]
With regards to the free level-up, I'd still calculate encounters by the average party level, meaning that free level would indeed be a boon. Conversely, I imagine it would be really fun to RP the interview with a god.