ack! I've not heard of anybody getting "de-leveled" apart from the preview events, you can keep the character that you make in them but when the it goes retail and you log in with them, they get reset - but you get to keep the name and look.
But when this happens, it also resets any progress, map explored and so on, and from what I remember when Factions when live, you end up level 1, not 2.
I'm not sure how you would check, but I suspect the characters you have are new ones, created with the same names as your old ones.
Like darkswan says, take it up with support, it's unlikely you'll get any response from them, as you can't prove you didn't give your stuff away, sucks I know but the reason GW is sub free is the support is quite limited.
I'd change your password just incase, and scan for trojans and the like, can't hurt to be paranoid