OK, I've checked on the various sources throughout the ages of RM, and
- in RM2 (Alchemy Companion), there were four options : casting level = level of wielder; casting level = level of creator; casting level = highest level of embedded spell + 1/2 (sum of levels of other embedded spells); casting level = higher of 1 and 3.
- in RMSS, as JDale indicated : casting level = highest level of spell used in item creation (which is basically the minimum level for the item creator).
- in RMU, as JDale indicated : casting level = spell level, modified upwards if the item maker also casts Increase Power.
The rule is clear(er), but I have to ask : what is the design reason behind the various changes ?
[More generally, I think RMU, as the latest incarnation of the RM rules, would have benefited from design notes so that readers could learn the rationale behind the rules and how they were balanced. A number of published games include those design notes and they are usually more interesting than the rules themselves].