I have a question about the delete account and restore purchases button. Does that mean I can delete my account, make a new one on the same device I originally purchased L2 on, hit restore purchases, and it will give the new account L2?

I believe so. Maybe don't delete your account in case it doesn't work, but I think if you restore purchases it should give you L2

I read on the faq that L2 is linked to accounts not devices, but then why would there be a restore purchases button?

I'm not sure. In case something goes wrong?

I think L2 is linked to the account, not the device. I will test this now.

UPDATE: My main account is L2, and I have a another one that is L1, on the same device. 8i logged into my alternate account, hit restore purchases, and I had to type in my Apple ID password, and boom, my alt now has L2.
I now believe that L2 is linked to the Apple ID, not the device or account. If you hit restore purchases and type in your Apple ID into, you can in theory make as many accounts as you want L2.