Well, you failed miserably :-)
Last season my values dropped by about 15% going from Level 1 to Level 2 - I'm waiting to see if that rate stays the same as I move up into Level 3 next season (my squad has an average age of around 22, so that may have some influence)
I didn't look at individual player values for that calculation, just overall squad value, but it seemed to about the same for everyone
To answer your second question I always try to keep the younger players, usually prioritising the most expensive ones, because their value will grow fastest with training (and usually they train faster as well). That means even if they go down in value between seasons, they will usually be up to the same value as before within a week
You need to find out how well your players train - I had a few that weren't good enough for my first team last year, but have trained so fast in a season and a half that they are now very strong reserves in a team that is packed with 6* players (growth of about 5-7 quality in one season without power training)
If you're Level 1, then players worth close to £1m are most likely to be your best trainers and will keep going up in skill and value. The caveat to that is if you have 3* or low 4* players at that value, they will be low quality for you next season so you might want to consider selling now while their value is high so you are ready to replace at the start of next season. But keep your highest 4* players and your 5*
There are (on my server at least) a lot of bargains around at the moment as people are selling off players they don't need for next season, so it's also worth a look to see if you can get some high rated 5* players that you can easily train to be 5* for next season (your players will lose a *)
I have read guides on this forum suggesting that getting older players with higher quality but lower cost is a good option on the low levels. I disagree completely. Young players train faster and their value goes up faster - only buy oldies if you have to fill a spot in the squad and your cash is really low