Is Nillion still developing a layer 2 solution for payments and network coordination?
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Nillion is not a blockchain so my interpretation is that they will need to rely on a blockchain for the ordering of transactions, which is critically needed for payment/network coordination in order to avoid double spends for example.
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That is true, but there is no need to create a new L2. There are plenty to choose from for settlements. I would love to get the teams feedback on this. @boxxy can you try to coax this information out of them? 
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My guess is to be Ethereum-aligned.
There’s pros and cons to L2’s and L1’s, I think L2’s benefit from Ethereum’s branding and helps onboard people more efficiently than building your own L1.
Obviously there are technical differences too that vary from what the chain will be used for.