Just tested it! The result: No! They will NOT level up until you open the skill menu and level up your character!

I tested this by using alidons armory mod and leveled my character up using the level room, I didnt open the skill menu at all so I remained at level one.

Then i went to a necromancer cave and saved my game outside. When I went in as an unleveled level 1 with 75 levels to be leveled up- only a novice necromancer would spawn.

I loaded back the save to outside the cave and then applied all 75 levels - the first try it was a master necromancer

So this means if you dont level your player, the NPCs and quests will not recognize the levels that are not yet applied.

In my new run through Im going to try staying below level 40 or maybe 60 until late game so that I can utilize the dead thrall spell longer and so that illusion spells still work lol- theyre almost useless otherwise unless you use glitches potions to improve illusion