I have a 1977 Fedders thermostat. I am thinking the mercury is not level because when I try to set it to the desired temperature the actual dial reads totally different. How do I level it?

I would get a digital thermostat. If you use your current one, understand it is NOT accurate and only a reference. If it reads 1,000 degrees and is where you want, set the temperature to 1,000 degrees, It is a reference.
Level would be nice to start, and fixed solid, so there is no play.
Even though it is analog, it should have pretty good repeatability.