If I fight and lose some Wounds because my Weapon level is too low, and then I also have to reduce the Weapon level further, do I take more Wounds?
Yes
Yes, sorry! For instance, if you have Weapon level 1 and fight a Beast with strength 5, you take 4 Wounds in the fight. Then if the Beast also tells you to reduce the Weapon level by 2, you take a further 1 Wound because of unfulfilled demand.