"Does an MP3 made from FLAC or a lossless WMA sound the same as made from WAV?" - Yes; FLAC, WMA Lossless and WAV are all "lossless" sources, except that WAV is uncompressed.
All are just "containers" for raw audio sample data, but lossless encoders pack the contents tighter and more efficiently. Think of a big, fluffy pillow, being put into a box.. it takes a certain size so that it fits snugly - that's uncompressed WAV, AIFF, etc. Now squeeze some air out of the pillow until it fits into a smaller box. Now take the pillow out of the smaller box, fluff it up a bit and it's still the same pillow - that's lossless compression.
Using our pillow analogy again - now try to pack it into a very tiny box. This time, no matter how much air we squeeze out, the box is just too small. We'll have to remove more than just air. Let's rip the seams a bit, yank out a few threads, pull out and throw away a few feathers. Hardly anyone will notice a few missing feathers. Now take the pillow out of the tiny box, fluff it up a bit and... damn, it's not the same any more, and we can't ever make it the same again because we threw away some feathers - that's lossy compression.
In both cases the pillow was "compressed", the difference being whether the compression algorithm used was "lossless" or "lossy" (pack bits more efficiently or throw some bits out, respectively).
"It takes 2x longer though" - The encoder has to decode the <lossless format> data and create a temporary WAV file "on the fly" and then encode to MP3. The whole process is quite math intensive.
"Does level 8 reduce sound quality?" - No, the encoder will just be more aggressive in it's efficient packing scheme than at lower settings.