The actual “character” level that you hire the merc at is irrelevant, only the difficulty you hire them in. The exception being the Nightmare Act 2 mercenaries, which cannot be hired in Normal (or Hell).
Mercenaries hired in normal difficulty have better final stats than those hired in Nightmare or Hell, and NM Mercs are better than those hired in Hell.
Most other mods (Crushing Blow, Open Wounds, Chance to Cast on Striking, Faster Cast Rate, Faster Hit Recovery, Increased Attack Speed, etc.) work on mercenaries.
The mod – Prevent Monster Heal does not work on mercenaries.