I've been playing in my first RtL campaign and I want to make sure that I understand exactly what happens with the Overlord cards when the heroes move into each dungeon level.

On the first dungeon level, the Overlord constructs his deck (if he has any treachery to spend), shuffles his deck, and draws three cards.

On the second and third dungeon levels, any Power cards in play remain in play (max:2), the Overlord keeps any cards currently in his hand at the time the last hero entered the portal, and the Overlord does not re-construct or shuffle his deck.

Is this correct?

Thanks in advance for your help!

Yes, this is correct. The three dungeon levels are part of one big dungeon, everything on both the hero's and the Overlord's side remains the same when switching levels, and the heroes start the next level inside the dungeon next to or on the glyph (even if they were visiting a town location when the last hero left the previous dungeon level through the portal).

The only important thing that relates to the Overlord deck that is different from a regular game is that if the Overlord depletes his deck twice in the same level, the heroes are kicked from the dungeon. This means that if the heroes leave a level shortly before the Overlord deck is depleted, they'll only have a tiny bit more than one stack of Overlord cards to go through before they're kicked.

Cool, thanks for the confirmation!