Team edit is available at Biscotti and Night Domain, there are card-deck like icon near the clock. That's about adding the to the team.
About leveling up. Remember the sigil at Sablee where blue seal were originally located and where you defeated Klehss? Look for the same thing at Biscotti. You can click on it and after meeting certain circumstances (level, amount of power orb, amount of shards) you can level up a witch.