1. I recall you having 1.23, just use that with plus instead, even that is better than using LK avalon. It's likely the levels will be 1.23 compatible. Now if I knew you weren't all "Oh but downloading it is illegal!" I would tell you just to download the real TSF because I belive it's okay to download abandonware, as the people aren't making money off it anymore so I don't see why they'd care. I honestly don't give a fly if I get banned for saying that because I barely post here anyways.

2. Not necessarily true. There are varying qualities of MP3s and there are a lot of great high quality ones out there, but it's really the size of the file that's the problem. They are significantly larger than tracker modules, and take quite a while to download directly from a server, which is my concern with them. Also like what DoubleGJ said, there are a lot of tracker modules which use low quality samples.

3. Ok this point is just ridiculous. Most people don't convert already smaller music pieces to MP3s for JJ2 levels. This is not the reason why people use MP3s into levels, they use it because it's the only music format that the song/tune/whatever it's in. Or in another case it can be converted to ogg (another plus only format), which can be slightly smaller but it usually doesn't make a huge difference. Also, so what if most levels aren't MP3s? While I try to avoid using them in MP for size reasons your statement is like saying "Oh so-and-so isn't used much so we shouldn't use it.".

TL;dr: Do your research.