I am sorry if this has been answered elsewhere, but is it possible to have multiple levels of the frightened condition? For instance, would a Goblin unit in a graveyard, being attacked by someone with a magic item that causes enemies to be frightened be "Frightened 3"? If so, does that mean he would retreat 6 spaces per flag rolled?

There may be units in the future that retreat more than 2 hexes per flag if frightened, but as of now it is 2 hexes for any unit that is frightened (even creatures, which already do retreat 2 hexes per flag). Unlike Bold, frightened does not stack (again, subject to current lore cards, terrain, and units - the possibility for "double frightened" units certainly could be exploited in the game).

For example, a play of Mists of Terror will only affect goblins in that they would not be able to ignore flags from support, embedded drummers, etc. - they would still take two hexes for each flag and be subject to panic losses as they normally would when retreating.