Auto generate mipmaps

D3DUSAGE_AUTOGENMIPMAPS is a hardware flag that asks the GPU to regenerate the mipmaps when the texture is dirtied (either by UpdateTexture or render-to-texture operations). Passing 0 for the texture levels when creating the texture asks D3DX to generate the mipmaps during loading (this is done only when loading the texture on the CPU). If the top surface of the texture changes later, the mipmaps won't be updated...

Yes. It's the same. The only difference is that D3DX also generates the data for the mipmaps when you load a texture. So in your case, yes you have to fill out the mipmaps manually one by one.

If you don't have automipmap generation on, then you have to lock each and every mipmap level manually and fill it up. With automipmap gen, yes... UpdateTexture does it...

hr = m_texture->LockRect(i, &lockedrect, NULL, /*i==0?D3DLOCK_DISCARD:0*/0);
I am locking a texture to fill the mipmap levels with data. Only thing is when i D3DLOCK_DISCARD the top level it messes the level up. I get an image that contains the source image multiple times. If the lock flag is 0 for all levels it works, why doesn't it work if I give the 0th level a discard flag?

Yes