You make an interesting suggestion, but how can you "level up," if you are staying the same? To become more powerful as a species, you inherently must acquire new power from somewhere.
Also, I think the biological ascension path makes a great deal of sense for xenophobic or "purity" focused empires. Most human xenophobic/purist organizations (which are of course, the basis for our consideration of these ideas in the first place) believe in their superiority, but not necessarily without room for improvement.
Genetic modification making the faction's primary race stronger, smarter, more long-lived, etc. are all improvements that don't even necessarily impact phenotype, much less do they imply full speciation. Even modifications for survival in a foreign biome wouldn't necessarily lead to speciation. I mean, it could, obviously, and the game certainly tags that biome change as speciation, but I would argue the very mechanics of population control and manipulation require them to be differentiated. The fact that members of the same starting race then become "different species" is just an unfortunate labeling side-effect. And a vehicle for political strife/game-play.
Anyway. What alternative path to "ascension" can you envision?