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Your question is quite long, so it's not clear what exactly you are asking.  It seems the main point is what Microchip means by Note 5 on page 7 of the datasheet:

<img src="https://electrical.codidact.com/uploads/YYoD7Bd4CXNzucMHPTPGDdRP">

You are right, that makes no sense.  Fortunately it's so clearly inconsistent with itself that you know it's wrong.  Not all datasheet errors are this obliging.

Reading between the lines, I'm guessing they meant to define dropout as the minimum Vin-Vout level that results in 1% output voltage drop, with Vin being at least 1 V.  That seems logical and reasonable.  This is partly corroborated by the short definition of Dropout Voltage on page 5:

<img src="https://electrical.codidact.com/uploads/tfLEqGYF2J4YFHTDAxZaHivE">

However, if you really need to rely on that spec, you should get explicit clarification from Microchip.

Humans make mistakes.  Datasheets are not immune to that, no less than the parts they describe, or your circuits you put those parts into.  Keep in mind that this is a former Micrel part, so the datasheet must have gone thru significant re-do to put it into the standard Microchip format.  If you are curious, go dig up the original Micrel datasheet.  Then you can see if this erorr was there all along and nobody at Microchip noticed, or it got introduced by all the edits of the re-formatting process.

In general, I find Microchip datasheets more clear than most, and they usually specify the parameters you actually care about.  However, they aren't perfect.  I've found some worse errors than this one over the years.  If you are feeling charitable, send a message to Microchip reporting this inconsistency.  I have found that they do actually address such errors in future versions.

<hr>

Here is another issue I noticed when reading your question:

<blockquote>drop-out voltage for the MIC29303WT as 80mV to 175mV MAX for an output current of 100mA. Moving to the next listed output current, 1.5A, we see 220mV of drop-out.</blockquote>

No, that's not what the datasheet says.  From Table 1-1, "Electrical Characteristics" on page 5:

<img src="https://electrical.codidact.com/uploads/buoJKqZrXj5JtyYgJbiphAhn">

The three columns in the middle are labeled "Min", "Typ", and "Max".  The top three lines apply to your part.  I included the bottom line only so that the full description in the left column was visible.

This is really giving you only two real data points.<ul>

<li><b>Line 1:</b>  At 100 mA output, the dropout can be as high as 175 mV.

<li><b>Line 3:</b>  At 3 A output, the dropout can be as high as 600 mV.

</ul>

That's it.  Line 2 contains no real actionable data at all.  It basically says:

<blockquote>At 1.5 A output, the dropout is usually around 250 mV.  Maybe.  On a good day.  If it's more and your circuit doesn't work, don't come crying to us.  As Dirty Harry would say, <i>"Do you feel lucky?  Well do ya, punk!?"</i></blockquote>

So what excactly can you count on at 1.5 A?  The absolute safe answer is that dropout won't exceed 600 mV.  However, you have a strong hint that it will be less even under worst can conditions.  250 mv is the <b>typical</b> value.  That means that you're about as likely to end up with more than 250 mV as less than 250 mV.  How much more?  See Dirty Harry for the answer.