By default, the specified levels are increased by one. In other words, a level 1 header in the XML block will become a level 2 header (H2) in the resulting HTML. The reason for this is because the H1 tag is reserved for the name / main title of the content object. The headings inside the XML block will thus become subheadings of the main title. This behavior can be changed by creating an override template for the "/content/datatype/view/ezxmltags/header.tpl" template (it can not be controlled from within an configuration file).
