If you change the dunning level in the dunning proposal, you can reduce it by as many levels as you wish, but can only raise it by one level. In addition, whether or not you can increase the dunning level depends on the last dunning level: if the dunning program has already raised the dunning level during the dunning run, you cannot enter a higher dunning level. You normally increase the dunning level manually if you unblock a blocked item in the dunning proposal.
The dunning program can only raise the dunning level for line items by one level at a time (from the previous dunning level). This applies even to blocked line items once the block has been removed.