Wow, don't know how I did that. Replied over my phone. Was waiting for a relative at a repair shop, and thought I read 2 vs 3.
I know of a live blues recording in a bar/club. You almost think it was recorded live with a minimalist technique. You hear the crowd, you can hear a couple of patrons getting drunker as the show goes on, and that they are sitting at the bar. You are stuck that this is a fantastic unprocessed live recording. This is successful stage 2 however. You have to listen really deep, and have done some mixing and such. You can hear it was nothing of the sort, it has delay and reverb added, but not all over. And the various processing varies over time for different things highlighted. Meaning it had to be done with several microphones and channels. I used to have a magazine article detailing how they did it and it was done with tons of mikes. So your thinking right now, "okay, that is another successful stage 2". However it would be easy, most likely even, to take that approach and mess it up so that it sounds as hokey as you'd expect. Not really live sounding, but a clumsy attempt etc. etc. Even if you did that however, you do have the somewhat satisfying interaction real time with the bar patrons and the music. That aliveness even done poorly comes across. The reason for this is there is a live real-time interaction you have recorded. Something that happened in the physical world behind it.
Could you do all of that with stage 3 artifice? Maybe, but it is much harder. The very lively real interaction would be hard to fake or would take lots of trouble. If you miss on creating this, you would have a terrible joke of a recording no one is likely to care about. The reason is you are a further step from anything that really happened. You might ask nonetheless, if someone did manage it in a much more artificial way would the listener care? No, they wouldn't. But this is one reason many movie scenes involving a crowd, instead of faking it all, they bother to hire extras to create a fake crowd to do the scenes. Yes mostly for the visual, but for the audio too. For that reason trying to stage 3 something like this is risky and the smart thing to do is not take this route for some music.
You might look at some of those youtube videos that put two artists together in concert who never were together. Like I think there is one of Freddie Mercury and Elvis. It gets into that uncanny valley effect. They have done pretty good work to fake it, but it just doesn't seem right anyway. Maybe this encompasses stage 4 video with stage 3 and 2 audio.
Bing and Bowie.
Multi singers that never did this song.
Mercury doing Bowie cover, a pretty awful result if you ask me.