This paper presents a comparative analysis of three-level (3L-NPC) and five-level (5L-NPC) Neutral-Point-Clamped converters using Finite Control Set Model Predictive Control (FCS-MPC) for reactive power compensation. The research addresses a critical gap by providing a direct performance comparison under identical operating conditions, supported by simulation and experimental validation of a 3L-NPC prototype. The study evaluates harmonic performance, dynamic response, and DC-link balance. Results demonstrate that the 5L-NPC topology significantly outperforms the 3L-NPC, achieving a simulated grid current Total Harmonic Distortion (THD) of 3.36% compared to 7.84% for the 3L-NPC. This 57.1% reduction in THD allows the 5L-NPC to comply with the IEEE Std. 519-2022 limit (<5%), whereas the 3L-NPC experimental results (9.9% THD) highlight the impact of practical non-idealities such as dead time and sensor noise. While the 5L-NPC offers superior power quality, it entails higher hardware complexity, evaluating 125 switching states compared to 27 in the 3L-NPC. These findings provide quantitative guidelines for selecting NPC topologies in high-performance grid compensation systems.