did you upload the CSSMenuWriter/cssmw/menu.css file after adding the new menu level, I Don't see any css in that css file for the level 2 menu items.
Your friends over here at WebAssist! These Dreamweaver extensions will assist you in building unlimited, custom websites.
These out-of-the-box solutions provide you proven, tested applications that can be up and running now. Build a store, a gallery, or a web-based email solution.