Yep. Or at least, that's what it looks like. Could be that Lucius knows Harry level 2, but is pretending to think Harry is level 3. Or, Harry is pretending to be Level 2 (actually level 4ish).
All of which makes Eliezer level ω.
It could even be that one of the players isn't thinking in a manner best represented by that metric. Beyond level 2 that whole system just starts to look trite.
ETA: There is now a third thread, so send new comments there.
Since the first thread has exceeded 500 comments, it seems time for a new one, with Eliezer's just-posted Chapter 33 & 34 to kick things off.
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