Hi Ian,
Of course, I also like to use the same source material for compiling all levels, that's the ideal case when you can handle the necessary amount of data.
This is especially true with orthophotos : Geoconverting low levels from source A orthophotos and high levels from source B orthophotos would result in source B textures popping up in front of the aircraft while flying, with associated radical colour/quality changes.
Your heightmap case is slightly different though. I provide again my AFS2 LOD resolutions table.
AFS2 LOD level 7 corresponds to a mesh resolution of approx. 150m, thus even if you have differences between 2 sources the transition has good chances to be smoothed.
I don't know what source dem resolutions you can get, but I would use a wide area source to compile at least a level 7 and maybe level 9 base, and see if compiling a local high resolution mesh in upper levels causes interface troubles or not.
Trial and error, as usual, to find the best compromise.
Cheers
Antoine