I have some data where I have 2 observations at lower level of analysis, also data with 3 observations, please guide so that I may decide that which data not to include. what is the banchmark,
They key is that you will be able to say little about any specific level-2 unit (as you have little information to do so) but you should be able (provided you have plenty of level 2 units) to estimate the between and within variance eg the between household and within household decomposition.
You may want to read this (unfinished) paper to understand about imbalance and precision-weighted estimation and the benefits that multilevel modelling brings