Regardless, at that point the dream would claim I had the option of going back to sleep, or waking all the way up. ... I've never actually taken the second option, however.

Oh, I have. Since I was 6 or 7, most all of my dreams have been lucid. During college, I would regularly dream recursively. I would fall asleep once in the real world, dream for a bit, then fall asleep again in a dream, then again in the dream within the dream, etc. It's confusing, but I dreamt lucidly enough to be aware of the recursion and keep track of the dream depth. If I fell asleep three times but only woke up twice, I'd know that next time I would wake up to the real world.

...

Or at least that's what my dreaming mind believed. In case it is not immediately obvious, dreaming "recursively" is just dreaming. You can "fall asleep" 3 times and "wake up" 7 times and still be dreaming.