I agree mostly with your theory, but it would be nice if P1 would just tell us. And then explain the theory behind the settings options. I don't think its unreasonable at the price point to expect this.That is exactly what it is doing, but via the sensor sampling instead of processing it post capture.
My theory is that at a specific pixel it will sample that pixel x amount of times by the chosen number of frames then average the data at that pixel and put that one averaged pixel into the raw file for that specific pixel.
This is done on the whole sensor as it easy to do it this way instead of taking individual captures of 10 pictures of 150MP each and then averaging that in camera. The back doesn't have the processing power for that.
Doing this at the pixel level as you suggest makes far more sense in consideration of the monster size individual files.
I appreciate, as I suspect others do as well, all of the testing done and information shared.
R