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I have created custom permission level (View&EditOnly) which lets users to just add and view the items. Then I created a group (nodeleteListGrp) and added that View&EditOnly permission level to the group.

When I check the permission levels of the group (nodeleteListGrp) it has the full control permission level grayed out. How can I remove the full control permission level from the group?

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If you click "Permission Levels" in the ribbon you go to the "global" list of permission levels (for this site collection) regardless of any selected group. "Full Control" is greyed out here because you can delete/change that

To edit the permissions of the selected group/user click "Edit User Permissions" to select which permission levels that is granted to the selected user/group

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site actions -> site permissions -> check the permission level -> click edit user permissions... this will allow you to change the permission levels. -hope this helps

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