Yes, stopping at level 3 in 10th grade when applying for a highly selective college (which expects level 4 or AP) and when the school offers level 4 would be disadvantageous. It’s a bit like stopping at algebra2 and not going for pre-calculus because you don’t like math. There is, however, no obligation to take calculus or AP foreign language, even for single digit acceptance colleges.
As I said, the rule about ’ level reached’ applies to all top colleges (about 110 I’m sure of). We can’t list the colleges for you because there are over a hundred of them.
The variations aren’t college-related but student-related (coming from a lower performing/poorly funded school, lived abroad, heritage speaker in one language, math prodigy, Intel winner, Olympian… ).
The rule about dual enrollment varies for the second and third semester due to college policy, but college level 1= 2 high school levels is pretty constant.
(just as often, but not as constantly, 6th grade language +7th grade language = level 1 in high school. The pace and expectations change when you go from one level of school to the next. This is made clear by the fact a middle school algebra or foreign language class will be classified as ‘high school’ level.)
I haven’t ‘seen’ it anywhere, I just know it from experience. If you want to convince your guidance counselor, email colleges asking precisely if stopping in the 10th grade after reaching level 3 would be competitive or if taking level 4 in high school would be better, and whether taking a local college’s level 3 course would be considere sufficient to be competitive.
Also, keep in mind that most colleges have foreign language graduation requirements, with freshman placement either based on hs level reached or based on a placement test.
This requirement varies - you can compare Amherst (zero), Williams (no foreign language requirement, but 3 required courses in arts/humanities and one cultural diversity class), Stanford (requirement waived for AP score or 630-640 on sat2, otherwise up to three quarters of a 4-5credit class.), Yale (AP +1 or up to 5) , or Tufts (up to 6 or two levels above AP or AP+ a set of prescribed courses.) The most common among top colleges tends to be a requirement of college level 3 or 4 but as the examples above show, it can vary widely. You can check the college catalog with your child if that’s a concern.
It should tell you something that when speaking about highly selective colleges most people here assumed AP 
even though your original question stated ‘three years’.