Definitely sounds promising, MB! Seems like I once read something similar to it somewhere else on MM, but it wasn't explained as well as here. I'll try to find that other thread.
I do sometimes meditate while falling asleep. And it does seem to have induced a few LDs. One way I meditate is to focus my attention on bodily sensations, which is the same as Step 3 of the "Cycle". I also focus attention on the feeling of breathing (inhaling and exhaling), which is a bodily sensation. But focusing on sight and hearing could also be really good. And cycling through all three seems like a great idea. One thing it might do is help keep your attention from drifting. When you just focus on one thing, such as breathing, it's very easy to get distracted by various thoughts and find yourself thinking about something, having forgotten to focus on the sensation at all. But cycling between three forms of focusing attention could make it less likely to get distracted. So it may be an easy way to stay in a meditative state for a longer period of time and also to achieve deeper levels of concentration and awareness. Besides being an LD-induction technique, it could be the key to achieving world peace. That would be a nice side effect.
Interesting that the cycle starts out with sight, which is the most complex and (yet) superficial of all the senses and ends with touch, with is the most basic, and (yet) profound of the senses. And hearing is somewhere in between, so it's Step 2. Might be a way of leading the mind gradually from a superficial level of awareness to a profound level of awareness. Or maybe not. Could be way off base about that.