I have seen a lot of people post that interpretation. I can see why people thought so, but somehow I feel it's just another world in which the same people were brought together in yet another different way.
My interpretation is pretty close to the one in this video (except I think she also agrees with you about the previous stuff being part of a TV show within the show, which to her is a level of understanding or ascension): https://www.youtube.com/watch?v=zKi-KyJkfgQ
I've always been suspicious about the bridge-jumping scene in S1 and whether OA was really meeting the kids and BBA for the first time, as well. I didn't really get into reading theories until the show was said to be "cancelled" (I don't think it really is). I just always felt that we were "misled" (more like re-directed) about where S1 connects to S2 (and everything else that happens).
Personally I don't think it was at the end of S1 that Prairie ends up jumping to the S2 dimension. If S1 leads to S2 anywhere, then I think it was when she jumped off the bridge right after escaping from Hap. What if what happens after the hospital scene is both the end and the beginning of the series (like the message on the door Karim reads in the infamous Nob Hill house)? And I don't think it's the least bit out of place for OA to have memories of things she technically hasn't experienced yet (i.e. teaching the movements to the kids and BBA in the later part of S1) in S2.
Elodie demonstrated that you can leave and return to a body in the same dimension. What if OA learned during her quest through multiple dimensions how to do just that, herself?
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