This seems like an oddly basic question for someone in a leadership role at this level, and I'll take a stab at how I would address it anyway. Your mileage may vary.
First you need to understand the motivation behind the down-grade. It could be something financially motivated. It's also possible that during the interview process the role itself changed because of the needs of the projects/clients/etc involved. It's also possible they interviewed you, heard your ideas and realized that the role was originally posted at too high a level.
Second you need to identify if you feel you can fill an M2's shoes based on your description in your comment. If you feel you have those skills and you feel the role still requires the same M2 responsibilities (also from your comment), then you should be blunt and direct. Ask very plainly why the role would be down-graded and indicate that you feel the M2 is more appropriate. I wouldn't take a hard stance necessarily, but it's also possible they're trying to low-ball you into accepting an offer. If your resume can't back up the skills of an M2 solidly, you may need to accept the M1.
Third there are general pay scales involved at companies of the size you're hinting at. You should ask to see them and look to negotiate an offer that is at least at the median. Bring facts and data to back up your claims of being worth this kind of investment. You should be able to show exactly how you're going to improve the company by excelling in the role.
Lastly, you should ask very clearly what the advancement track is. You should ask about the resources available for professional growth. You should have a candid chat with the person who will become your leader and ask them "Based on how I interviewed and the vision you have for this [division|department|whatever], what skills will be necessary for me to work on and how do you anticipate assisting me with that growth plan."
You should have some ideas on what they should expect from you at that level and how you plan to meet their expectations. You should have your own goals and a stated plan for achieving them and be able to show how those goals fit within the company's strategic vision or at least tactical application.
It's ok to accept a down-graded position even if you feel you're qualified for the higher one so long as you feel there is a clear and achievable path to the one you want. If that path isn't there, you may be locking yourself into a unenviable position. A red flag for me personally is that it really shouldn't take 6 months to fill an M1 level as you describe it. It'd certainly be something to bring up.
