Does my reasoning here seem correct?

It doesn't.

Both loops will cause a stack overflow if you get rid of the recursion limit altogether and recompile Pd. You can probably figure out a dynamic patching hack to elucidate this-- for each trip through the wire connection that feeds back into the chain, copy and paste that part of the chain and add it to the canvas. When you're done you'll see how many objects you had to traverse in order for the recursion to work. (This has the added effect of increasing memory on the heap, which doesn't happen with the recursive loop, but under normal circumstances that shouldn't matter. Your memory limits for the stack are much lower than the heap.)

In a compiled language like C, the compiler can take a pattern like your 2nd chain and re-arrange it into a functionally equivalent iterative loop-- this is called tail call optimization. Even Javascript now has that as a feature. But Pd has no such feature, nor any feature really to optimize computation across a chain of control objects.