I had a levy on my bank account then suddenly the levy was released, but the judgement is still on my credit report what does this mean

Yes, if you have a judgement against you, (even if it is paid in full) it will appear on your credit report, since it shows a legal action taken to collect a debt.

The credit report is not connected to what the bank does, it is merely a report of what has happened in the past.

Why was the levy dropped? Was some arrangement reached?

You have a legal right to have inaccurate or questionable reports on you credit removed or modified.

Disputing Errors on Credit Reports | Consumer Information

Credit Repair Services | 2015 Reviews & Ratings | BadCredit.org

How to Dispute Items on a Credit Report | eHow

How to Get Stuff Removed From a Credit Report | eHow

They can report whatever they like but it's up to YOU to dispute it. CYOA (Cover Your Own Arse!)