What level of Japanese is really required?

One of the requirements is that your case worker should believe that you can live a normal productive life in Japan before recommending citizenship.  While some people have lived in Japan for 10 or 15 years without learning any Japanese by always relying on their significant other, friends, or living in a bubble - this is not considered being a productive member of society.  (Just as someone living in Boston Chinatown without learning any English isn't really living in America in many ways).  This means that during your interactions with your case worker, he or she (likely he) should be satisfied that you know enough Japanese to get by on your own.

To be more literal, there are many things you will have to do in the course of applying for citizenship which require you to use the language of the land:

0. Before even meeting your case worker, you will have to make an appointment the first time - this requires speaking with the receptionist - in Japanese.

1. In-person interviews with your case-worker.  While not written anywhere, these will of course take place in Japanese.  Even in the unlikely event that your case worker actually knows English, you can be sure they will want to use Japanese just to get a sense of your ability.

2. Guide books.  Your case worker will give you a pamphlet and guide books.  At least some of this material is in Japanese, and certaily the detailed portions are only provided in Japanese.  

3. Requesting Supporting Documents - You will have to deal with other parts of the Japanese government (including the staff at your local city hall), whoever is in charge of payroll accounting at your employer, and your landlord, realter or property manager.  It's safe to say that most of this interaction will have to be in Japanese for the typical applicant.  What's more, some of the items would be difficult to explain in English (for example, there are multiple slightly different tax certificates available from City Hall).

4. Translating Documents - For documents not available in Japanese, you will have to request them in English (or whtever language they are available in), and then translate them into Japanese.  You can pay a translator to do this for you, however it will become quite costly as there are typically dozens of documents required during the process.

5. Your motivational essay - This is the one part that is really non-negotiable.  You have to write this yourself, by hand, on paper.  No Google translate, no word processors, no having your friends write it for you.  They may ask you to read it out loud or explain it to them.  

How much do you have to do yourself?

You have to go to the interviews yourself, and you have to write the motivational essay yourself.

There is no law saying that you have to gather the documents yourself, so you can have your friends, or lawyers help you with reading and understanding the guides, as well as requesting and translating supporting documentation.