It is an interesting thought, but I don't personally think that Cassavetes intended it to be a film-within-a-film. If anything, the situations that follow that scene are more to the reality of their lives than the screening room scene, where everybody applies their appropriate, ahem, faces -- Richard plays the cocksure, overly-confident businessman (while the reality of the situation is far from that), the film-makers are all sycophantic, etc. In other words, I think that the scene exists to provide an intentional contrast to the rest of the film.
Actually, Cassavetes' previous film was "A Child Is Waiting". "Shadows", while not successful in the US (partially due to the fact that it could not find a US distributor), was successful in Europe. The two films that followed "Shadows", however, were not successful at all, and in particular, Cassavetes thought at the time that his career was over following a very public altercation with Stanley Kramer (who re-edited "A Child Is Waiting" without Cassavetes' input), and "Faces" was actually written and shot in response to the Hollywood studio system.
To me, the screening room dialogue is exactly that: a bunch of meaningless, hollow dialogue being thrown around in order to *sell* a film. Every statement that they make about the film smacks of hyperbole -- in fact, they never actually discuss the film that they're about to screen so much as they throw out catchy descriptors of what the film's selling points are supposed to be.
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