But it wasn't an MH flight, it was a KL flight, KL4102. The rules on the website do not state that some KL flights will not earn level miles. In fact, they imply that all KL flights will earn level miles:

http://www.klm.com/nl_en/index.jsp (FB terms & conditions)

"2.5. All scheduled Air France, KLM and SkyTeam operated flights, including flights with a Air France or KLM flight number showing the AF or KL designated code, qualify for Level- and Award Miles accumulation. Flights operated by
Airline Partners, other than SkyTeam qualify for Award Miles only. Level- and Award Miles accumulation may be reduced or excluded on certain booking classes or fare types on Air France, KLM, SkyTeam- or Airline Partner’s operated flights as specified in Flying Blue Communication. Excluded are the
following fare types: Flight Award travel, travel industry reduced rates, free or non-revenue tickets, military or government tickets. Non public fares are not eligible for mileage accumulation."

They do state, as you point out, that MH flights, such as, say, MH 4, KUL/LHR, which is not a KL flight because it is not an "included flight with an AF or KL code", and not in the KLM timetable (and not therefore a flight that a KLM customer seeking to maintain loyalty could be expected to choose) does not qualify for level miles.

But do I take it that your reading is that irrespective of whether the flight has a KL code, the opportunity to earn level miles depends not on whether there is a KL designation, but merely who operates the flight? If so, why do they include the qualifier:

"including flights with a Air France or KLM flight number showing the AF or KL designated code"?

It might help to consider what flights the 'inclusion' is expected to gather in. What flights might have an AF or KL designation (ie, so that clause 2.5 requires to be included for level miles) but not be operated by KLM, AF, or Skyteam (ie, not embraced in the main term of the condition 2.5)? Well - it would seem that flights such as KL4102 operated by Malaysian would fall into the 'to be included' category -
as possesing a KL code, but not operated by KLM etc.

The point is whether all KL coded flights earn level miles under clause 2.5 (assuming, of course, that the ticket was purchased for the KL flight at KLM prices).

Talisman