"You have a matrix ...": correct. "And then ...": whether that's correct depends on what you mean by "in the process", but it's certainly not entirely unlike what I meant :-).
Your last paragraph is too metaphorical for me to work out whether I share your concerns. (My description was extremely handwavy so I'm in no position to complain.) I think the scaffolding required is basically just the agent's knowledge. (To clarify a couple of points: not necessarily minimum description length, which of course is uncomputable, but something like "shortest description the agent can readily come up with"; and of course in practice what I describe is way too onerous computationally but some crude approximation might be manageable.)
The basic issue is whether the utility weights ("description lengths") reflect the subjective preferences. If they do, it's an entirely different kettle of fish. If they don't, I don't see why "my wife" should get much more weight than "the girl next to me on a bus".
Summary: the problem with Pascal's Mugging arguments is that, intuitively, some probabilities are just too small to care about. There might be a principled reason for ignoring some probabilities, namely that they violate an implicit assumption behind expected utility theory. This suggests a possible approach for formally defining a "probability small enough to ignore", though there's still a bit of arbitrariness in it.