I've heard of ALTs switching to CIRs, but I don't think it's that commonplace. Perhaps it was more common when you were a JET, jason. On a CIR forum that I read from time-to-time, I never hear about anyone switching from ALT to CIR, it's always a new applicant going directly for CIR -- something that I'm doing right now, in fact. I just had my interview at the Japanese consulate in Chicago.
As far as JLPT Level 2, I don't believe its an actual
requirement to be a CIR, but your Japanese should be roughly at that level. However, you should still definitely take it, as it will help out when you're applying. The CIR position is a lot harder to get than an ALT, and I think Japanese language skills is often the deciding factor. In my interview they had me read a couple articles from Japanese magazines and then they asked me questions about what I read... so you might do well to brush up on your reading skills by ordering a couple Japanese magazines or a newspaper.
Anyway, I won't know if I'm hired for a few months yet, but things look good