How do we reconcile these two statements: 1. people are judged as they judge others 2. the righteous are judged very strictly Presumably someone at a very high spiritual level would be very good at judging others favorably and mercifully, so, if they judged others that way, then according to statement 1, they themselves should be judged mercifully and favorably. Why is it, then, that I have also heard rabbis say the second statement about people who are on very lofty spiritual levels?
Very nice question! The answer is based upon a general understanding of midrashic statements. The main point of such aggadic sayings is the moral or educational lesson of each particular source, even though sometimes it's just one part of a complex picture, which is necessary to teach in that respective context. We obviously don't totally know God's way of judging people, but what's important is the teaching how we (!) should judge others. The first statement's goal is to teach us to judge others favorably, and according to the principle of "mida k'neged mida" [= "measure for measure"], God obviously will add that among the positive factors He uses when judging us. On the other hand, life is complex, and God's judgement is also complex and multifaceted. The second statement you cited teaches that another one of the factors involved in God's judgement, is that the righteous peoples' measuring stick is relatively demanding, compared to others. He judges everyone according to their abilities, background, education, nature, nurture etc. etc. and holds each person accountable only according to that person's respective & subjective measuring stick. In short both are true and taken into account, and their messages are dually important to get us to be better people.