"HW rulez" mod (add-on) for HoMM3.

So, if you're building in a Rampart, for example, and you've built 4 levels, is it pointless to try to rebuild the fourth level until you build the fifth?

Yes, that's exactly how it works. All levels must be built.
In my opinion, it's quite reasonable to prevent it from being overpowered, so that there's no desire to consistently get slow/haste on the first level with all the upgrades. And so that the building cost doesn't need to be changed.