Example: Machamp uses Take out on Dialga G LVL.X. Would the Dialga be knocked out or would it just take 40? If it would only take 40, would it be classified as an evolved Pokémon? Or would it be neither?
While in play, a Level X is the same stage/evolution state as the Pokemon that it leveled up.
If you level up a Basic/unevolved Pokemon, it is still unevolved.
If you level up an evolved Stage 2, it is still an evolved Stage 2.
Note that this only applies to a Pokemon while it is in play. Not in play, it's a Level Up card. A Pokemon Card, but neither a Basic or an Evolution card.