"Things that i am considering and will try out tonight are: "

Nothing must be tried out in a water level controller UNLESS you have a solid AC sensing mechanism in place. I am not talking theory - but out of real damn experience.

With this DC sensing you will alter current level, change materials from aluminium to platinum and do all circus. But the fact remains electrolysis WILL happen and one of the electrodes will be gone long before - and if you tend to handle water with lots of dissolved salts, the probes will be in a total mess.

And for heavens sake dont fry MCUs by directly loading the pins with probes, rods, lamps and the like..

While on this, read this also,
http://www.8052.com/forum/read.phtml?id=61807

Raghu