Having Octavarium continue the meta album but also loop back into itself was genius for the octave/Octavarium concept. It's not a whole they dug, it's a run of albums they finished off in a fitting way as the end of an era.
Yeah, but until they came up with the idea of doing the whole octave theme, they kinda did dig themselves into a hole. Didn't MP say something about how they wanted to stop doing the meta albums, and that was just the way they came up with? I'm quite sure it wasn't the plan from the very beginning, when they decided to do do the meta album thing in the first place.
No idea. I can't remember hearing anything like that (I wasn't as active on the internet at the time), but it's not really digging a hole, since there was no obligation to continue it, unlike say the album spanning 12SS which needed a conclusion.
Obviously nobody expected SDOIT to start off with the static of SFAM, that was just a choice DT made to start that album. SDOIT ended with a clear fade-out, so nobody expected it to carry over to the next album, it just seemed like a fun back to back album nugget solely for SFAM>SDOIT. And even then, ITNOG ended cleanly too, so there was no obligation to continue it again to their 8th album, and had they not done it, nobody would have expected they had to do it.
Given the effort put into Octavarium, and how the meta-album fits into that, I wouldn't say they were in a hole, because it spawned a lot of ideas. But they could have stopped at any time before that, and it wouldn't have mattered one bit.