I succeeded in generating this error with a pure perl program (v5.10.1 (*) built for i686-cygwin-thread-multi-64int) with the following code:

#!/usr/bin/perl -w
use strict;
use Data::Dumper;
$Data::Dumper::Indent = 1;

my $hashref;

for my $i0 (1..2) {
  for my $i1 (1..2) {
    for my $i2 (1..2) {
      $hashref->{"$i0"}{"$i0:$i1"}{"$i0:$i1:$i2"} = "$i0:$i1:$i2";
    }
  }
}

deletehashlevel($hashref, 1);

print Dumper($hashref);

exit;

sub athashleveldo {
  my ($h, $n, $action) = @_;
  if ($n==0) {
    $action->($h);
  } else {
    athashleveldo($_, $n-1, $action) for values %$h;
  }
}

sub deletehashlevel {
  my ($h, $n) = @_;
  athashleveldo($h, $n, sub {
    my %tmp;
    for my $key (keys %$h) {
      my $val = delete $h->{$key};
      @tmp{keys %$val} = values %$val;
    }
    %$h = %tmp;
  });
}
__END__
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Running this program:

$ ./testhashdel
Use of freed value in iteration at ./testhashdel line 27.
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The error goes away when I apply the same solution as js1 did, replacing:

  athashleveldo($_, $n-1, $action) for values %$h;
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with

  my @v = values %$h;
  athashleveldo($_, $n-1, $action) for @v;
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Is this a bug in Perl, lurking to bite me at some later time?