I did some reading (okay Wikipedia-ing) on this character (it's from Silent Hill) and am not sure I'm on the right track. Here is version 1:
I think thought that something like this might be sweeter
Pyramidhead, the Darkest Ego
1B
Legendary Creature - Demon Spirit
Uncommon
Level up 3BB, poisonous 1
Whenever Pyramidhead deals damage to a player, put a level counter on him.
2/1
// Level 1-3
First strike, poisonous 2
Whenever Pyramidhead deals damage to a player, put a level counter on him and he deals 2 damage to you.
5/2
// Level 4+
Double strike, poisonous 3
At the begining of your upkeep, choose one: Increase your ante; or sacrifice all permanents you control other than Pyramidhead; or Pyramidhead deals 3 damage to you.
6/3
sweeeeet.
Edit: I have a feeling this doesn't work as intended. I will have a look at the RoE FAQ for leveler rules (I think the higher levels are additive to the first rule box, rather than replacing them.. otherwise the level up ability wouldn't work!)