Is it possible through the UI while leveling, or in char sheet, to replace existing domain card with another of same level or lower (per rules)?
When you go back into the Character Builder you can navigate to the choices you made on previous level ups and deselect the card you chose at that time in order to replace it with another for that level.
It won’t let you choose a higher level though. I want to get ride of all my level 2 spells and upgrade to level 4 when I reach level 4. How do I do that?
I just double checked the rules text and that’s by design. When you gain a level you have the option of taking a domain card of your new level or lower and then you also have the option of swapping 1 domain card for an equal level or lower.