Your "level 3" items are not immediate children of the parent, so they will not update with the query.
Id Parent_Id Title
1 1 Parent1
2 1
3 2
5 5 Parent2
6 5
7 7 Parent3
8 7
9 8
You will need to run a second query for the grandchildren to match the parents, something like this should get you started
UPDATE t1
SET t1.Title = t2.Title
FROM HierarchyTable t1
INNER JOIN HierarchTable t2 ON t1.Parent_Id = t2.Id