Hello, This is nothing new and an arbitrary decision by Lilypond, simply because XeTeX defaults to 1.5 and thus produces error when embedding a 1.7 PDF.
But this means that whatever problem you have should not come frome the PDF CompatibilityLevel, as this did never change (and anyway a lower version should only limit the amount of functionality but not create a need for conversion). If you really want Lilypond to output 1.7 pdf files then change in scm/ backend-library.scm in the function postscript->pdf the line "/ CompatibilityLevel 1.4” to "/CompatibilityLevel 1.7”. Still, I don’t think that this is your problem. Cheers, Valentin
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