Revisiting this, all this seems to be markedly improved now.
Trust Level Badge granting
You still collect badges as you go (i.e. when you hit TL2 you keep the TL1 badge too)
However, this is much less of a problem than it was due to how they are handled in the UI.
Badges displaying on user cards
The most ‘senior’ TL badge is placed on the far left, and then they seem to be ordered by ‘grade’, with gold first.l
Badges displaying on /my/badges
This seems to be by grade / time. Basically, this usually highlights the highest TL well enough without specifically featuring it.
Personally, I’d prefer for them to be the same (current TL leftmost on card and top left on profile), but this is good enough for me to not bother with messing about with the badges any more.