In LBB-only OD&D, dwarves can rise no higher than 6th level as fighting men, halflings can rise no higher than 4th level in that same class, and elves can reach 4th level as fighters and 8th level as magic-users. Greyhawk increased the level limits of all available non-humans, considerably in some cases. For example, halflings were unlimited in their advancement in the new class of thief. AD&D continued this trend, with every race being capable of unlimited advancement in at least one class (usually thief) and the level cap for other available classes somewhere in the range of 8-10 (halflings being the prime exception -- I guess Gary really didn't like the little guys). And of course Unearthed Arcana further expanded the options and scope of advancement for demihumans.
Equally interesting is what the 1981 B/X rules do for demihumans. First, they pare down OD&D's post-Greyhawk options for demihumans to a single racial class. However, in each case, the racial class has a level limit much higher than the limits found in OD&D (or even AD&D in most cases). For instance, a dwarf can rise to 12th level in his fighter-inspired racial class, while elves can reach 10th and halflings 8th -- all more than what's generally possible in either OD&D or AD&D. It's only in the matter of thievery that B/X severely curtails the advancement of demihumans compared to other versions of D&D.
I bring all this up because, over the last four years, a lot of virtual ink has been spilled in the old school community about demihuman level limits and their supposed rightness or wrongness. I used to be of the opinion that level limits were worth defending on two main grounds, one historical and one philosophical. The historical is that all versions of the game prior to 2000 included them, so, therefore, they're part of the game's heritage. The philosophical is, I admit, an ex post facto justification that it subtly discourages the play of non-humans and thereby keeps the game humanocentric, as Gygax intended.
I'm no longer convinced that the philosophical justification holds much water, particularly in light of the fact that every version of the game after 1974 has continually upped the level limits on demihumans across the board. Likewise, if one really wishes to limit the number of demihumans in a campaign, there are simpler ways to do so, such as making them NPC-only or requiring, as some old school RPGs did, a roll on a random table to see if one can play a demihuman, with the table weighted heavily in favor of humans.
The historical argument holds more weight for me, though not as much as it once did, in light of the continual increase in the level limits over the years. More importantly, as a practical matter, I'm not sure the level limits really matter. In my OD&D-flavored Labyrinth Lord (which closely follows B/X) campaign, the lowest level limit for non-humans is 8 for goblins (since they're modeled on halflings) and, after more than two years of play, no character has yet reached level 8. My recollection of the good ol' days is that it was uncommon, even when we played nearly daily, for PCs to get much higher than 9th or 10th level, meaning that neither dwarves nor elves would feel the bite of level limits, generally speaking.
I get the desire to want to limit demihumans in some way compared to humans; I really do. However, recent experience has taught me that it's, ultimately, not a big enough deal to worry about unless one's intention is simply to play the game as originally conceived without alteration. Otherwise, I have come to see level limits as a distinction without a difference -- a way to rein in demihuman "power" without actually doing so in a way that matters for the vast majority of D&D campaigns.
So, if it makes everyone who hates level limits happier to know they've won me over, enjoy. I am defeated and recant of my past errors. You ascending AC heretics, on the other hand, I'm still at war with you.