I have found that I get 100% of the items in various levels in the first Little Big Planet, but I don't get the "Level Aced" reward. What am I not getting right?
You Ace a level by completing it without dying. (If playing with multiple people, one death will invalidate everyone from acing the level)
The 100%, as you seem to have gathered, means you've collected all the prize bubbles in the level. (stickers, costumes, decorations)