Hello again xytiz,
For your additional questions:
"1. Can I connect channel 1 line out on L1-classic to Channel 4 input of L1-model 1 without a -20db pad ?"
With an XLR-to-1/4" cable, yes. I have never tried it, but it seems logical. I think the reason they suggest XLR-to-XLR with pad is that the XLR inputs are balanced and optimized for mic-level signals -- longer cables can be used without fear of interference or dB loss. The 1/4" inputs on the Model 1 and Classic (including the ones in the center of channels 1 and 2) are unbalanced and optimized for instruments.
"2. If Pad is necessary then with that logic does output of T1 mixer also need to be padded before giving it to channel 1 i/p on L1-classic ?"
Your logic is correct. If you connect the T1 output to the channel 1 XLR, you probably will need the pad. If you connect to the 1/4" on channel 1, you probably won't. If your T1 will be close to the Classic (shorter cable) I'd probably use the 1/4"; if over 12 feet away, use the XLR with pad.
"3. I think I don't understand "line level" terminology correctly, Hence I keep asking these questions. My apologies for my ignorance."
Don't apologize -- we learn all kinds of things by asking! I am not an electrical engineer or audio professional, just another user who has learned as I go. Generally speaking, mic levels are weak and need lots of amplification; instrument levels are stronger but still need amplification; line-level signals are higher. It's just a matter of closely matching the output level to what the input jack is expecting. There's a huge difference between mic- and line-level (requiring a pad), while there's less of a difference between instrument- and line-level (you can usually manage by turning down the mixer's output and speaker's input. That's why they recommend setting the Model 1 / Classic volume to 3 when using a T1.) The T1 can put out a strong line-level signal, just be sure not to overdrive your Classic's inputs.
There's a great explanation on Sweetwater's site here: Differences Between Signal Levels
"4. How to connect headphones ? I can use AUX o/p for headphones ?"
Yes, since the T1 master out is connected to and L1, you'll have to use Aux for headphones. While it does work, the T1 wasn't designed with headphones in mind, so your success will depend on your phones. Since the phones expect a stereo signal and Aux puts out a mono balanced signal, you might experience some cancellation. You'll just have to test them. If you've never set up Aux before, this page has some instructions.
"Thanks in advance. Even one line answers will do , I want to be sensitive to your time."
I appreciate it. I'm retired, so I have plenty of time and volunteer some of it here. As always, I hope you have as much time as you think you'll need to test your combinations, and be prepared to change connectors or inputs if you don't get exactly what you need!
Does that help?