Can I create a module level function object dynamically from string

Yes use exec:

>>> mystr = \
"""
def foo(a=1): 
    print a
    pass
"""
>>> exec mystr
>>> foo
<function foo at 0x0274F0F0>

You can also use compile here, it supports modes like exec,eval,single:

In [1]: mystr = \
"""
def foo(a=1): 
        print a
        pass
"""
   ...: 

In [2]: c=compile(mystr,"",'single')

In [3]: exec c

In [4]: foo
Out[4]: <function __main__.foo>

help on compile:

In [5]: compile?
Type:       builtin_function_or_method
String Form:<built-in function compile>
Namespace:  Python builtin
Docstring:
compile(source, filename, mode[, flags[, dont_inherit]]) -> code object

Compile the source string (a Python module, statement or expression)
into a code object that can be executed by the exec statement or eval().
The filename will be used for run-time error messages.
The mode must be 'exec' to compile a module, 'single' to compile a
single (interactive) statement, or 'eval' to compile an expression.
The flags argument, if present, controls which future statements influence
the compilation of the code.
The dont_inherit argument, if non-zero, stops the compilation inheriting
the effects of any future statements in effect in the code calling
compile; if absent or zero these statements do influence the compilation,
in addition to any features explicitly specified.