What exactly is the point to upgrading magic to extremely high levels other then the few minor bonuses?
First of all, what levels your pretender has, determines the kind and quality of bless that all your sacred troops will receive. Any extra bit matters, as it essentially improves a lot of troops without any additional cost. How valuable it is exactly, depends a lot on the nation chosen.
Additionally, on a battlefield, apart from needing a certain level to be even able to cast a spell, additional levels above the requirement increases the penetration(for those spells who use it, like Master Enslave, Opposition etc.), and reduce fatigue - this can mean that your 4 Death mage can cast Darkness and then fall unconscious for the rest of the battle, while your lvl 8 Death mage can shrug most of the fatigue off, letting him cast more spells without pausing.
Penetration bonuses count for rituals as well, so a better mage can e.g. perform better at Mindhunting, or casting Leprosy.
Extra magic levels make the overland spells harder to dispell.
Lastly, each point of magic skill changes the mages personal statistics a bit, but this is really just the icing on a cake.
By "leveling up" do you mean empowering magic power with crystals? Then it is indeed a poor choice. Sometimes necessary, yes, but in general, when you want to allow a mage to cast some higher level spells, you just forge him a set of appropriate items - it's cheaper this way, and let's you switch the gear to other mages if needed be.
The top-difficulty spells, like Wish, which is I think 9 Astral ritual, might actually require a pretender to cast it. And I think it's good, considering the things you can do with it.
