Mr Leveling thinner should work just fine with Mr Surfacer. I spray 1000 all the time as a primer, with no problems at all. Don't think I've ever used the leveling thinner with it, just the regular (or cheap auto store) thinner, since a flat finish is all you're after. I thin at least 1:1, usually more.
I usually use 500 as more of a brush on filler, although I've sprayed it on parts I wanted a rougher finish. No problems at all, it even layed down dissapointingly smooth!
I have found Mr Surfacer 1200 needs a different technique, if thinned too much and layed on quite wet, it tends to crack as it dries. Keep the coats thin and again, no problem.
Don't know what your problem might be. Perhaps try the regular GSI Creos thinner (without the retarder) or move up to the smoother Mr Surfacer 1000? With a bit of experimentation I imagine you should find a way to make it work as well as it does for me.