You can dismiss any, or all  of your troops as you desire, whether the idea of dismissing lower levels to reduce food costs,and so increase power is sound, is another topic.

Of course  for the same amount of food consumption you can have twice as many T1 as T2 and if you are smart and well advanced you can increase food production and reduce  consumption considerably.

To dismiss any troops  you need to go to the shrine of Odin and click on the picture and follow the instructions.

Yes even low level troops can be upgraded if you research the knowledge.

The basic way is to consult Oracle then military.

The only upkeep cost is food.  What many people do, including me, is not to feed your troops. The troops do not die nor is there any other penalty.  You need to have a source of food for when it is needed for building or knowledge or troop training but the packages of food you acquire from Invader and Ghost hunting, treasure hunts etc. prove sufficient plus, especially at your early stage, clans maintain stores of all resources and you have only to ask to be provided with as much as you need.  You can also send such food as you acquire - completing tasks or pillaging etc. - to the clan's bank (or to the stronghold).