Serana seemed to level properly when I played her, but I'm playing on 360 and need to know whether she (and the others) really do, or whether I need to Wabbajack them.

While we're about it, I Wabbajacked a follower today and it didn't seem to work (J'Zahgo is still suspiciously short of Magicka and reliant on Sparks at level 11). It would be so like Beth to fix the Wabbajack exploit and not fix the follower leveling bug ...

I was unaware the wabbajack had that ability

So I've read: dismiss follower, Wabbajack them, and when they transform back from the Dremora Churl that has been chasing you around for the last 30 seconds they should be leveled. Of course, just because I've read it online doesn't mean it's true ... in fact, it hardly ever is.

It's true.

1) Dismiss your follower.

2) Use the Wabbajack on him/her until he/her turns into, e.g. Rabbit, Dremora, Etc...

3) If when your follower turns back normal has has the original equipment back, it means he/she levelled up with you.

The Wabbajack trick doesn't work on Essential followers, since it won't transform them.
J'zargo will always use Sparks, even at Lvl 81, which is why he svcks and all of his potential is wasted. He has the potential to be the best Mage follower in the game, but he does nothing but cast Sparks once he gets in range. He also has the highest potential for tanking, since he has high Health/Heavy Armor at 81, but he has a heavy Mage AI, and tends to keep his distance, letting you be the distraction. So the best Mage follower in the game, is either Serana or Marcurio, and the best Tanks in the game, are the Housecarls.

Do I need to wait until high level to hire an armored troll in order to get the best possible iteration?

Good question, but trolls may be slightly different in that they can be killed and reacquired. I would have thought that - whether or not they level - they would probably be acquired at the appropriate player level.

Still no answer on my original question though ... I thought I'd get twenty responses saying "There have been a hundred threads on this already, use search" but I'm beginning to think that no one has established this yet.

Call me crazy, but I'm bumping this again since - unlike the questions about the carry weight of the scrolls or whether you can marry Serana - my question still hasn't been answered.

I'd assume it's because nobody is entirely sure. I'm sure a solid answer can be given when the PC version is released, though.

Have you tried to see if the armor changes after using the Wabbajack?

My character who needs to use followers is only just getting to Dawnguard now: the idea was really to get an answer before I ended up getting a load of followers who were only good for a few levels. I'll do some checking once I've had Serana for a few levels, but it won't be soon.

I've read that patch 1.6 fixed the follower leveling issue... just wasn't stated in the release notes. So I would assume Dawnguard followers level correctly.

There seems to have been some discussion of this on UESP, but I haven't seen a definitive statement anywhere. I'm using a follower at nearly level 30 whom I got at about level 5, so it's possible that this has been fixed. Hope so.