Last night I finished up my map for the 4th level of the Megadungeon. I recycled a few other dungeon maps that I could fit together easily with a bit of slight modification only, and drew one page of natural caverns for a quick and easy 4 sheets of graph paper level (plus a small sub-level tacked on to one side).
I'm thinking this will take me forever to get it all stocked, and it's only 4 levels. Don't worry, though, Old School fans, I'll just take my time, persevere, and eventually get this thing worked out. Most likely as soon as I've got players going through what I've already worked out, keeping just ahead of them.
Thinking about the overall layout of the place, though, I think after level 5 I'll start shrinking the levels down again, so the overall shape is like a diamond. I was originally of the opinion that each level should have about 3-4 times the amount of XP that an average party (5-6 characters of various classes) would need to level up. That way, they could still have things to explore after that level up (when they could venture deeper). Also, when characters die, there would still be plenty of loot left for leveling up replacements.
At the higher levels, though, characters don't stay dead as much, and also they're likely to be doing some explorations in the wilderness (I don't think I could run a standard campaign without throwing in a trip or two to the Isle of Dread, for example). So they won't need to get all of their XP from the Megadungeon.
So the lowest levels likely don't need to be so big, they just need to be fairly epic. It might not make much sense to have a small level packed to the gills with dragons, balrogs, vampires, and giants, but well, we'll see when we get there. Besides, if it can work in games like Ultima and Wizardry, I'm sure I can get it to work in D&D.