Does this plugin need a skyblock plugin?

It does not essentially need a skyblock plugin, but you will get the best experience with a skyblock plugin. A skyblock plugin is used to obtain the permssion (or level) of the owner, in order to choose a generator. In a plain vanilla world, there is no way to fetch directly the player permissions mining on the generator. So CustomOreGen will just reuse the permission of the closest player mining on a generator, while ignoring the island level (because there isn’t any)

Ores are not generated, why?

If you’re using Bentobox, verify that the MagicCobblestoneGenerator addon is disabled. If you’re not using Bentobox, check if your skyblock plugin has any in-built oregenerators. If so, ask the developer to add an opt-out option.

Can I use both levels and permission?

This is not possible in CustomOreGen, but in AdvancedOreGen.