If a Colossal figure is on level 1 elevation but still next to a figure on Level 2 elevation can the figure on level 2 make a close combat attack against the Colossal figure? In other words, do both figures have to be on Level 2 or both on Level 1 in order for the figure to attack the Colossal character, assuming the figure on Level 2 is on the square at the edge of the elevation??

The two squares are not adjacent to each other.

Colossals have special rules for their attacks.

"Regular" figs do not.

(you didn't mention stairs in your post so I am just guessing you know how those would change things)

Thomas is correct, assuming the normal character does not have access to Leap/Climb.

LEAP/CLIMB Give this character a move action and move it up to its speed value; during this movement, this character adds 2 to its d6 roll when breaking away and can use IM: Elevated, hindering, outside blocking, may move through squares adjacent to or
occupied by opposing characters, but still needs to break away normally. When you give this character a close combat action, it may target a character regardless of the target’s elevation.

The Giant Reach ability is usually what gives the larger sized figures their advantage at elevation.

Giant Reach:X
When this character makes a close combat attack, characters occupying a square that is within X squares and line of fire may be targeted as if they were adjacent. This ability can’t be countered.