The champion system basically means that once a character gets leveled to the max you can pay a one-time ISO fee to make them a champion. When you get a cover for them after that, it can be applied as a champion level, increasing their level by 1 with a corresponding Power boost. A two-star can get 50 champion levels, and their maximum level is therefore 144. Three-, four- and fivestars can get 100 champion levels and reach 266/370/550 respectively. You also get a reward for each champion level - usually ISO, but also tokens, covers and CP. You can also change the cover setup on a champion whenever you want.
Yeah... fivestars are a thing now, but it's not something you need to worry about right now. Command Points (CP, the Little stars) is the main way to get fivestar covers, but for now you are probably better off just saving them and not opening or buying any Legendary tokens. Focus on the Three-star tier, then the fourstar tier, then you can start worrying about the fivestar tier.
And yes, some characters have been reworked and revised. Can't go through all the Changes, it's probably easiest that you go to the Character Discussion forum and look up the ones you are interested in. Loki's new green ability is his best by the way, incredibly annoying.
Another thing you should know about is the Bonus Hero system. When you get a Three-star or better from a token there is a chance you get Another cover of the same rarity. The Bonus Cover will be one of your favorite characters, a random color. Ideally, you want to set at least one character in each rarity as a favorite. To set them as a favorite, go to the roster list, take up their front page, and press the Little heart button so the heart turns yellow.