In the EQEmu community, legit means the difference between allowing the use of gm commands or not. A server that doesn't allow any gm commands (or maybe only just a couple very simple ones to show your stats or let you zone with them) is generally considered legit. A server that allows access to the more important gm commands that let you summon items and/or level to any level you want is considered non-legit or maybe even semi-legit depending on how high of commands and how many they give players access to.
Almost all EQEmu servers are custom in 1 way or another. Most servers that actually list themselves as custom are ones that generally try to remake the content of EQ in a whole new way, or that at least change things around considerably. Non-custom servers like PEQ and P99 are ones that try to emulate live content as closely as they possibly can.
Every server is a bit different, and some are considerably different from what EQLive players are used to. That doesn't affect whether or not you should have to actually level or not. Whether the server has you level or not is up to the server's devs. Custom or non-custom, leveling is generally a factor in playing EQ.
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