Priest level, smiting and magic resistance

[tinkthank]

At which levels do you then get a penetration bonus?

Penetration is calculated by the requirements of the spell.

For every 2 Levels above the Spell's path Requirement you are given 1 MR Penetration.

So Banishment has 1 MR Penetration at Holy 3 and 2 MR Penetration Holy 5.

Smite Demon has 1 MR Penetration at Holy 5.

This works for all spells.

[NTJedi]

Do those Magic Penetration items work for the priests too??

Yes, they work for them.

A holy 5 priest with a Spell Focus has a good chance of banishing some of the upper end undead (like Wailing Ladies, Lictors, etc) with it.