...well, if using BLOCKS.000 and SPRITES.000 and LEVEL#.000 all together works perfectly, then all is right with the world. Good to hear it. Don't try to crossbreed extensions unless you really know what you're doing -- if nothing else, there's little value to be gained in it. As for the bottom of the map, does it really matter? Put your start position a tile or two farther up and call it a day.

Masks: Two possibilities. Check your event list -- if they're Diamondus events, then yes, all your renaming got you in trouble and if you have an inherently Diamondus-style level using Medivo graphics. Otherwise, it's entirely possible that they are actually unmasked tiles. Tiles 44, 58, and 59, for instance, are unmasked (in LEVEL0.002, at least) despite looking like walls. This is because JJ1 has no real equivalent to layer 3 in JJ2. In order to go behind a tile, that tile must be unmasked and there must be a foreground event on it, and therefore many blocksets include maskless versions of some basic wall tiles to create secrets with. This is one of the advantages of using J1LES for the actual level layout (as opposed to setting up animations, events, etc.): it's much much easier to look at your level and check what is or is not masked.