So you're saying you have switched OFF all the panels from level1.c within the menu code? And this is still happening?

My first guess is maybe you have a while() loop somewhere in the level code that is switching the panels on every frame, and for whatever reason it's not stopping when the menu comes up. In that case just add a simple if(is(menu,SHOW)) break; to the loop. That's just a guess though. That's probably the mistake I would have made.

Sometimes the most remote lines in the tiniest parts of your code causes massive problems. I'd do an Edit>Find in SED to find every occurrence of the panel names, to see if you are switching them on at wrong times.