King Tut and the Wight Brothers say "Characters of higher Levels [than 3] lose two levels, even if they escape." Does that mean you lose two levels even if you defeat those monsters?

But if you cannot defeat them, then you must try to run away, and you'll lose the two levels even if you do escape. If they catch you, of course, you do suffer the Bad Stuff from those Monsters. (But you don't lose the two levels twice!)