Hi Rejeev,
OLAP Universes are available in XI 3.1 and a relational Universe (UNX) is available in BI4.
Yes Web Intelligence can be used with these Universe - but it will not give you an OLAP experience because Web Intelligence is not an OLAP / analytical tool.
the OLAP Universe in XI 3.1 does give you the hierarchies but in a flattened way.
The recommended way is to directly leverage the BEx query without the Universe in BI4. Yes - you do get the hierarchies but elements such as a custom calculation should be part of your BEx query
Ingo