As you are trying to interpret what the number
$$\sqrt{i\sqrt{i\sqrt{i\sqrt{\cdots}}}}$$
you are going sequentially to understand this, which is a good strategy. However, the direction in which you are looking at this number isn't really the correct direction.
Take an example, lets consider the series;
$$1+\frac{1}{2}+\frac{1}{4}+\frac{1}{8}+\cdots.$$
Now, in order to evaluate this series, we look at it in the following manner;
$$\text{Step 1: }\text{ }\text{ }1+\frac{1}{2}=\frac{3}{2}=1.5$$
$$\text{Step 2: }\text{ }\text{ }1+\frac{1}{2}+\frac{1}{4}=\frac{7}{4}=1.75$$
$$\text{Step 3: }\text{ }\text{ }1+\frac{1}{2}+\frac{1}{4}+\frac{1}{8}=\frac{15}{8}=1.875$$
$$\vdots$$
As we continue doing this, we learn that as we keep adding without stopping, the series eventually get closer and closer to $2,$ and;
It can get as close to $2$ as possible, if we add a sufficient amount of times.
So now, we can simply say that as we continue this process infinitely many times, the answer becomes equal to $2.$ Makes sense right? The fact is, we are viewing from the place we started from, and not from the place where we end.
Now, when we consider the 'series';
$$\sqrt{i\sqrt{i\sqrt{i\sqrt{\cdots}}}},$$
we are basically looking at it as starting with $i$ and repeating a particular operation a number of times;
Start with $1,$ multiply by $i$ and take the square root;
$$\sqrt{i}=e^{\frac{\pi}{4}i}$$
Now, start with $e^{\frac{\pi}{4}i},$ multiply by $i$ and take the square root;
\begin{align*}
\sqrt{i\sqrt{i}}
&=\sqrt{i\cdot e^{\frac{\pi}{4}i}}\\
&=\sqrt{e^{\frac{3\pi}{4}i}}\\
&=e^{\frac{3\pi}{8}i}.
\end{align*}
Now, start with $e^{\frac{3\pi}{8}i},$ multiply by $i$ and take the square root;
\begin{align*}
\sqrt{i\sqrt{i\sqrt{i}}}
&=\sqrt{i\cdot e^{\frac{3\pi}{8}i}}\\
&=\sqrt{e^{\frac{7\pi}{8}i}}\\
&=e^{\frac{7\pi}{16}i}.
\end{align*}
Now, start with $e^{\frac{7\pi}{16}i},$ multiply by $i$ and take the square root;
\begin{align*}
\sqrt{i\sqrt{i\sqrt{i\sqrt{i}}}}
&=\sqrt{i\cdot e^{\frac{7\pi}{16}i}}\\
&=\sqrt{e^{\frac{15\pi}{16}i}}\\
&=e^{\frac{15\pi}{32}i}.
\end{align*}
As we keep repeating this operation over and over again, we can see that the sequence of numbers we are getting is;
$$e^{\frac{3\pi}{8}i},e^{\frac{7\pi}{16}i},e^{\frac{15\pi}{32}i},\dots$$
Notice that the exponent is getting closer and closer to $\frac{\pi}{2}$? So this means that as we continue to make the operation of ;
"multiply by $i$ and take the square root,"
we will finally get closer and closer to $e^{\frac{\pi}{2}i}=i.$ As thus, we can 'say' that;
$$\sqrt{i\sqrt{i\sqrt{i\sqrt{\cdots}}}}=i.$$
And, this way is how you must look at this series. Not the other way, as you said;
And more generally, any finite expansion of the nested radical can be interpreted as "some number that, if repeated squared and divided by i a total of n times, gives 1."
So, answering your question:
is this a correct way of thinking about the partial terms of the series?
No it's not. The way you must see it is as what I just described to you. Thanks for reading, hope this helps :)
Comment if you have any further questions.
Edit 1
I saw your comment, and saw what your main question is so I'm going to add it down here. Now, when we were considering the nested series of radicals; $\sqrt{i\sqrt{i\sqrt{i\sqrt{\cdots}}}}=i,$ we are mainly only considering the 'principal' square root of the number we get, as we keep repeating the operation over and over again.
However, you want to understand the possible outcomes when we do not restrict ourselves to a 'principle' square root, which is indeed a great question to ask. So in order to understand it that way, lets first note that we are not going to look at the confusing way you stated in your question; "some number that, if repeated squared and divided by i a total of n times, gives 1." We are again going to look at it from the point of view that we've so far been working on.
So, I am going to try and understand all the possible values of $\sqrt{i\sqrt{i\sqrt{i\cdots}}}$ when we consider any square root (not necessarily the principle square root). Note that all of the possible values we can get, are obtained by choosing either principle square root, or non principle square root in each part of the process.
So, first note then in any of these operations, we never move out of the unit circle, and we always stay on it (multiplying by $i$, or taking square root), so the number obtained would always be of the form $e^{\frac{k}{2}\pi i}$ for some $k\in[0,4).$ Thus, for simplicity, we will not consider the actual complex number $e^{\frac{k}{2}\pi i},$ but just the $k$ part of the number. We are basically mapping the unit circle the set $[0,4).$
So for example $i$ will be written as $1,$ $-1$ will be written as $2,$ and $1$ will be written as $0,$ and so on. We will only be using the new notation after this.
Now, lets understand the algorithm in terms of the new notation.
Now how do we need to start?
We need to start with $0.$
What is the operation that needs to be repeated?
First of all, we need to take to original number and add $1$ or subtract $3$ according to which one can keep us in $[0,4)$ (this is basically multiplication by $i$). After the addition/subtraction, we need to either divide it by $2,$ or divide it by $2$ and add $2.$ Its our choice (this is equivalent to taking either the principle root or the non-principle root).
So lets, get started with doing these operations;
Note: We will code the choices (principle or non-principle) as 0 or 1. These choices will then form a sort of a 'binary' code for each possibility of the final number obtained. Notice that this is just like the Base 2 method of encoding each number?
$1$: Start with $0.$ Adding $1$ gives $1,$ and taking the non-principle root gives $\frac{1}{2}+2=\frac{5}{2}.$
$0$: Start with $\frac{5}{2}.$ Adding $1$ gives $\frac{7}{2},$ and taking the principle root gives $\frac{7}{4}$
$0$: Start with $\frac{7}{4}.$ Adding $1$ gives $\frac{11}{4},$ and taking the principle root gives $\frac{11}{8}$
$0$: Start with $\frac{11}{8}.$ Adding $1$ gives $\frac{19}{8},$ and taking the principle root gives $\frac{19}{16}$
We can keep doing these operations, and get various different results. Note that they are best tried on a number line (unfortunately I can't draw one here but you can try it yourself)
Now, after doing these operations I noticed that when we keep trying both of the operations simultaneously, we would reach no where, and the answer would keep moving around like the sequence $1,0,1,0,1,0,\dots$ So if we want to see this process converge to some number, we must finally resort to just one of these operations. If we consider the principle square root all the time, then we'll get the original answer $i$ (or $1$ in the new notation), however, if we consider non-principle square root all the time, we'll get it to converge at $-1$ eventually, (you can check)
In some cases, the sequence doesn't converge and rather becomes cyclical. But that's all not very important. The main idea is, how we can represent the numbers using the 'binary' notation, where some of them correspond to a real complex number and some do not.
Hope this helps:) Please comment for any further questions or ideas or errors in my argument.