This was a great challenge, thanks for sharing! I do agree that the messaging could be improved a bit about what is possible and what is not.
Here are my solutions, for anyone who is interested: https://gist.github.com/meew0/98cca86cd3f64ee71fe39bf747aa01...
It wasn't clear at all to me that the peg doesn't need to overlap the holes perfectly, I was almost ready to give up at lvl 2! Thank you for the solution