This excellent summary was written by Dan Hess of the Ironside Group.  It provides insight into the use of levels from a TM1 dimension for use in Report Studio (and indeed Cognos Express Xcelerator and Cognos Express Reporter).

TM1 and Report Studio – The Mystery of the Missing Levels

As many of you know, TM1 has become a major component of the IBM Cognos BI application offerings. As a corporate OLAP solution, there are a number of advantages to utilizing TM1 versus PowerPlay; from faster response times in larger cubes to the capability to handle vast volumes of data. The expectation of course is that the application will work within the IBM Cognos BI infrastructure, specifically within the user facing studios that make Cognos a best of breed solution. While this is true in most aspects, there are a couple of “work arounds” that must be implemented in order to optimize the user experience with TM1 as an MDX based data source.