Is this the "level difference factor" that you are referring to? In the advanced settings page what does the score "total without penalty" imply?
on the advanced tab, hit "refresh" and see the overall estimated ratings, using the current preset and/or sliders if you've altered them for the pets you have in the journal.
total, is the total score/rating that your current pet lineup has.
the penalty (as far as i believe) is the offset that you might have when encountering a specific critter or dragonkin.
the rating is worked out before each round starts, based off health and the current enemy pet family, in some cases can be different, e.g. in the case of fable/legendary pets where a critter has undead attacks or something blithe and annoying.
(possibly, it could mean something else entirely,) but the gist is that it's an estimate for the current stats the pets have.
as health drops,or increases, the rating will change.
when the enemy team changes to another family (critter, dragonkin, undead, aquatic, etc.) the rating will change.
and, as a pet gains a level, ratings will change. so, not many cases.
for most people, level difference is the more confusing slider, since this is what will more often, pull a level 3 back into fighting a level 25 again.
without storing a special value in Pokeh to "kill" the ringer, it will always come up as being a viable choice in a power-level rating.
using a "kill" variable may offset the scale that the level system uses. the problem of setting a "kill" value is it has to be set and used by the swapping function as well as the "pet swap" for multiple pets. which is okay, but if the slot changes, it won't know which pet is the "dead" pet it's supposed to be looking for.
it really only sees the rating of the pet, not the type or GUID, it just sees A, B, C, and chooses the higher rating. modifying the swap system to acknowledge certain pets as "dead" or "just give up swapping", since the ratings don't store in-combat values like "getting-ass-kicked" or "do-the-thing-i-want-you-to-do-you-know-like-that-thing-i-wanted" , it will be an issue for another day. IDK.