When I got the "level up" bug - again, I read something about turning off the WiFi, restarting AF to clear the decks, and then turning WiFi back on. *Very* happy to say, "It Works!" No loss of level or points, and allows the game to continue.
Level Up bug shows its face when starting AF, getting server update screen, then level up screen comes on and then freezes, tossing you out of the program.
The Fix: Turn WiFi off, then restart AF, which should proceed as normal, fully booting up. Once the game is going smoothly, exit, restart WiFi, and you should be good to go from that point on.