i think the quest has a lot of promise. it just needs some tweaking. as nightmare said, playtesting the quest would go a long way to smoothing things out. early game is just brutal, but by level 4 the difficulty levels out and seems about right for the contest. actually other than level 1 and the overworld the difficulty is probably good. my recommendation for the overworld is to guide the player to where you want them to go at the start of the quest, so have easier or less enemies on those screens you want them to visit, and harder enemies everywhere else - and the "easier" screens don't need to be 1st or 2nd quest easy you can still have your poweredup enemies just find the balance. i'd keep the overworld boomerang where you have it, make it the wooden one, and ditch the boomerang in L1, maybe move the clue for it to somewhere on the "easy path".
i just beat level 7 and i gotta say that the level design is among the best of the contest quests i've played - your dungeons are interesting, not too linear and they have good flow. too many of the other contest quest dungeons are just linear gauntlets or mazes of confusing passageways. only criticisms with the dungeons themselves is that a couple might be a little small, the one is a really unusual shape, and i have yet to see an off map screen.
a couple other criticisms
. make your push blocks consistent within the quest - its fine that they are different than 1st or 2nd quest just make them consistent throughout your quest - its one of those factors that adds to the tediousness
. almost every dungeon room is just filled with one type of enemy, mix it up a bit. you could use more bubbles as well.
. less kill all enemies for shutter or block rooms when the enemies are splitting type and when its a room that needs to be travelled numerous times
. play some of the other quests in the contest to see what types of custom enemies they've created. diagonal sword throwing darknuts, charging darknuts, zols that tribble on boomerang hit but die to sword, pols voice that one hit kill with wand instead of arrows, etc. not to say you have bad enemies - i like the fast shooting moblins, and the tribbling goriyas and 4-way sword stalfos are just evil (good evil).
. was your intent for the red zol to be a heart/rupee mining enemy? if you want them to harder than create a custom dropset without the clock. as they are right now its too easy to use them to get back to full health and 200 rupees in less than 30 seconds.
more later. but don't let any of this discourage you. your quest has promise.