Sounds like a couple questions mixed into one - so here's a mix of thoughts:
Interview or Don't Interview
If you are so happy in your current job that you would never, ever in a million years leave it - then don't bother interviewing. The interview experience is different every time, and one interview won't be worth the time and effort drain of taking off time, scheduling, getting there, etc.
If, however, you have even a small nugget of "yeah, this could be my dream job and if it was I would take it" - then go for it.
One thing to realize - when you have absolutely no desire at all for a new job, you will approach the interview very differently than if you really want the opportunity. Interviews are absolutely psychological, and open to interpretation - the relaxation and confidence that comes from not really caring cannot be faked. Which means the reuse value of a "not caring" interview can be limited when it comes to the next job hunt where you really want a new job.
Why Me?
OK, next one - why would they hunt down and then spend time/money interviewing someone whose resume clearly doesn't fit the job description?
Hiring in the areas of knowledge work, at least, is not an exact science. I'd say it fits into the realm of art, even. There's no one perfect way to select a candidate and there's no "perfect" candidate in 99% of the cases, because in most scenarios, the perfect candidate is the one with the most potential, not the one demonstrating the perfect skill set for the current crisis.
There's a few things that can generally be considered in this sort of thing:
Job seniority is fungible - There may be a driving reason for a certain level of experience, but in many cases, 1 level up or 1 level down can be overlooked if the person is a good fit. Sometimes the hiring manager can control this.
They don't really know - depending on the organization and their current dynamic, they may not know what an outside candidate of this seniority really looks like. They may need to interview a few people before they are able to make that determination. Ranks are both a way to find, label and pay new people, and a way to improve the pay and increase the responsibilities of existing staff. Sometimes if the organization hasn't done a lot of hiring in recent memory, they only have that internal perspective.
The politics are inscrutable - there can be all kinds of fascinating back story to why or how a role was set up a certain way. Previous job-holders, current strategies, customer needs, internal interest - there can be all kinds of influences that have nothing to do with the job that needs doing or the person doing it.
I wouldn't be overly worried about the competition - it'll definitely vary from position to position and location to location... but you may be the only candidate that stood out, even for a senior role.
Wondering about the nature of your team is fine - I think everyone has the same question. Chances are, what you want is your team to be smart, capable and able to work together to achieve good stuff. Whether their titles are accurate or not is probably not the biggest thing - so long as your pay is relatively fair for what you can contribute. It's a relevant question to ask in the interview - "tell me about the team I'd be working with" is always a safe question.
Another thought to ask, if you get there - what about promotions and raises? If you are taking a role slightly above your current comfort level, will you be stymied in the next few years when it's time for raises? How do promotions work? Given that the role seems an odd fit for you, it's a reasonable question.
