When i use my BGII character (currently level 11 Paladin) will i keep my levels and armour (my current AC is -12, without cheating) and if i am reduced down to something like level 1 what would be the point in being able it import BGII characters?????
And seeing as i am still doing the thieves guild missions, my character has a long way to go.

The point is, there is no point. You might as well forget about using a char from baldurs gate 2 and make a new one so it is in the vault and is official.
People who complain about losing all their experience and equipment have to understand that if this didnt happen, then your character would be way to high lvl starting off. Also lots of people would use hacked characters, making it pointless to be a dm.

Me, in my campaigns im using my Baldurs Gate 2 chars as characters in them. Other than that im starting over with a official character.

Also your lvl 11 now, and thats like maybe only halfway through the game, by the time you'll beat it he will be lvl 18+ and what would be the point of using him then? Even if he still had all that experience it would be boring.

Bazz,
You can play totally legit, thru the Vault, but that means it really is pointless to bring in your BG2 character.
BUT....don't forget.... you can play locally. In that case, its totally cool to use your current char with all accumulated levels and stats. Of course, others you run into may have totally hacked out chars, but thems the breaks.
I plan on doing both. I play with friends, and we all want to keep our current chars. But we also want to start Vault Chars...so's way we can do other GM's games and everyone knows we legit.

**v**