Try this:
ISSUE DESCRIPTION
====================
Leveling does not work after projects are migrated to Project Server 2003.
RESOLUTION
===========
1: Set “Can Level†for resource to Yes in Project Professional.
1. Use Administrator to logon to the Project Server via Project
Professional.
2. Checkout all the Enterprise Resources created via AD.
- To do so, click "Tools" Ã "Enterprise Options" Ã "Open Enterprise
Resource Pool".
3. Insert "Can Level" field, and set this value for all the resources to
"Yes".
- To do so, Click “Insertâ€Ã “Column†à “Can Levelâ€
4. Close Enterprise Resource Pool.
2: Or Modify RES_CAN_LEVEL field to 1 in the MSP_RESOURCES table on Project
Server database.
3: The issue’s fixed in Project Server SP1.