I would stop at #11 (and although this is hard, I would also aim to have students feel #11 after every step).
12. Tweak the original "rules" in some way and return to #1.
In terms of addressing the floundering that can occur in progressive models, I think the key (not that this is easy) is teaching kids how to do #1 through #11 (well, imho the cycle of #1 through #12). Even "playing" can be taught. Consider the development kids go through when playing boardgames. They start with games like Chutes & Ladders which has absolutely no strategy and children simply enjoy the unknown of what you're going to roll next and where you'll end up. This eventually evolves into greater sophisticated game play where students have to make decisions (whether or not to buy that property in Monopoly, for example). This evolves into more sophisticated strategies such as thinking ahead (Chess), thinking about your opponent's thinking (Settlers of Catan), making inferences based on past play (Poker), etc.
I believe the game metaphor can be extended to math problems, even traditional ones. Just as an example, consider how the "rules" of subtraction evolve throughout elementary school:
1. Single digit whole #'s with the first being larger than the second
2. Multiple digit whole #'s with the first being larger than the second
3. Multiple digit whole #'s with the first being larger than the second, but requiring borrowing
4. Whole #'s with the second being larger than the first
6. Subtraction of integers
7. Subtraction of rationals
We change (usually relaxing) the rules as we progress through the curriculum. It's nice that this also mirrors what mathematicians often do, relaxing or restricting conditions and exploring the ramifications.