So one of my issues with the module is that the level 2 milestone has SO MUCH stuff to cover before you get there. You guys haven't gotten quite there yet but when I have ran it for my IRL group I did level up them at this point in the story before. I am going to leave it up to a vote, if you want a level up or not now or follow the module closer.
only difference is that I need to make some manual tweaks to an encounter or two in order to coming up to make them harder if you do level up.
Want a Level Up now? Multi
Level up earlier than module recommends (I am done with level 1)
Follow the modules Milestones for level up