If your DM didn't stat the character out and has no intention of putting the NPC into combat I'd say that's a 0 level character. The little girl fetching water from the well in the background who is just there for flavor text, like the cripples and the people that he would take hostage are what I would consider 0 level. A level 1 is a shopkeeper that the players are going to rob but is prepared to put up a fight in or a farmer that is going to tag along and show the party the location and help fight the goblins that have been harassing him. 0 level is non combatant characters that are strictly part of the environment. You may be right as far as RAW but you know what I mean.