functionally level means the saddle nose is tiltled up or down slightly and the rider isn’t rolling forward onto their perenium in case 1, or getting upward pressure on it in case 2. And yes, that depends on the saddle, the rider’s pelvic geometry, and morphology (how the rider’s weight is distributed through shoulders, hips, lower body).
These guys are riding for 30 hours a week. if they were crushing their junk all the time, or were constantly having to do a press-up on the bars, they wouldn’t be able to maintain the position. It works for some very fit athletes whose body type enables them to ride with a fair amount of downward tilt (our local shop owner is a former pro marathon mtb guy – the saddle tilt on his road rig would have me sliding into the bottom racket, but he’s dead stable on a 4 hr ride, and his arms and hands are relaxed the whole time).
The answer to all this is that if it works for them, it works for them. If it doesn’t work for you, it doesn’t. Saddle fore aft and tilt depend on a slew of factors. You can’t just set up your bike like Adam Hansen and “adapt to it” unless you’re Adam Hansen.