The basic structure of this sentence is:
The difference between Japanese swords and other swords is (in) X.
The "is" in the translation simply corresponds to the copula です at the end of the original sentence. There is no need to change it to something else like "could be".
The "X" part consists of two nested ...
I would parse it this way:
The difference between Japanese swords and other swords is this: How much do they care about "how beautiful are the ripples and iron?"?
And since this way there are essentially two implicit questions in this phrase it makes sense that there are two か.
I think the で is indicating the method/way the 5 levels are determined.
The examples don't have an embedded question but, here's some with questions:
I think replacing で with の ...