I agree essentially with your comments. The whole thing is becoming increasingly messy and the current path and trajectory is not promising.
You once asked me recently where do I see a red line with the US. At that time I responded I don't see one (yet). Unfortunately I am seeing one staring right in front of me. Freedom of navigation and right to transit in international waters is fundamental to US foreign policy grounded out of the very essence of freedom of navigation on the high seas. This principle is sacrosanct in my view and goes back to the very founding of the US as a nation. The words of the Defence Secretary was obvious and direct. The USN will sail anywhere in accordance with international law. Those that say why is the US so concern about some bunch of rocks in the high seas do not understand the significance of the issue. What is even more surprising is China's current attempt to restrict US navigation as reported by the CNN episode. China is already changing the facts on the ground by the reclamation and the US has no pretext to get engage. The freedom of navigation issue changed the whole dynamics. I don't even see any tactical or strategic reason for China to limit navigation and transit at this stage.
Fortunately I don't think China will be intending to challenge any nation's freedom of navigation in an all encompassing sense -- that is to say, not beyond some warnings and words for USN ships or aircraft that approach
I see China's goal regarding its island reclamation as multipronged but with a common goal. China seeks to increase its civilian and military presence in SCS, it seeks the ability to project limited airpower from particular islands, it seeks to give its civilian population (including fishermen) the ability to maintain longer duration presence... and I believe the end goal for all this is the ability to maintain a long term air and naval power there during peacetime as an overwatch to primarily protect China's own SLOC in the area.
Closing SLOC and limiting civilian FON will only occur during wartime, and tbh the USN would probably do that to Chinese shipping in event of war as well and I see the PRC goal as seeking to prevent that.
Of course, a larger Chinese air and naval presence in SCS will also complicate US surveillance near China's southern coast and Hainan as Chinese jets and surface combatants are more able to track and intercept USN or associated vessels at longer distances.
I think both PRC and US have laid their cards on the table: China isn't going to cease its reclamation and building activites and will very likely say they retain the right to deploy what assets they want onto these islands... and the US will continue to challenge China's sovereignty on a particular number of reclaimed reefs and FON in the SCS overall.
The absolute red line for war to occur I see for the US, is China shooting at USN aircraft or ships which enter the 12nmi zone for certain reefs. I doubt that's going to happen, given they can continue their reclamation unimpeded so long as there is no physical obstruction...
Which brings me to a red line for China, namely being USN aircraft or ships or personnel obstructing, boarding, seizing, or shooting at any Chinese ships or personnel in the area (including ships involved in the reclamation process). I also doubt the US will choose this option.
So my projection is in the medium term, China's going to finish its reclamation and eventually start deploying some military assets onto certain islands as well as greater civilian presence, while the US is going to heighten its military surveillance and presence near the islands and possibly send ships or aircraft within the 12nmi line... all with both sides increasing in rhetoric and with US seeking to draw China's SCS neighbours into a collective alliance against China while China uses other means to try and prevent them from forming too explicit an alliance.
The unknowns of course is how successful an anti-China alliance in the region will be, as well as what kind of military projection China will ultimately seek to acquire for the area... and whether the US has a red line for Chinese military capabilities operating under its own "FON" in SCS.