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just discovered this.

the Wizarding hat states that a charector that takes it gets a random lore and may cast spells from that lore as a level 2 wizard.

if an ogre SM(Level4 wizard), or any other wizard, takes this item does he go to being a level 2 or does he retain his actual level.

OR does he just cast spells from the Hat's lore at Level2 and other spells he normally has at his normal level

He becomes a level 2.

so he drops from level 4 to level 2.

Yes: the hat specifically states the wizard level you have. May be worth it to have non-OK magic in your army. I doubt it though.

I certaintly would never use this item on a Slaughtermaster. maybe a 2nd Tyrant at really high point levels.