To me, the level three's are the Brawl Orb. I never really liked it because it took away from the fight, so I always disabled it.
For versus, I would like to see an option to disable level 3's.
If you play with confirms, there's no reason to use a Level 3 anyways. If you don't, you can still grapple them when they have 2+ bars and take away 20+ seconds of work on their part. If you can't do either, many 3's are fairly easy to dodge and/or only kill you once, and the ones that are good are very expensive.
The orb really was dumb, though, imo; all matches just became King of the Hill, essentially, once it appeared on the map... same reason why I don't really like Medusa's Gaze in this game.