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I always took it to mean that even though he woke up and walked out the door to a sunny day, it implied that that too was just a dream, and that he was really still asleep back in the green velvet chair...
This will be way too much of a spoiler, those who haven't heard "Incredible Adventures" shouldn't read on, but I think you are right...
Jack fell asleep in the chair and dreamed of a land with flying ships. In that realm he entered Mad Mazoola's fortress, and found a room like his own living room, complete with a green velvet chair. He sat in this chair, fell asleep and dreamed. Inside that dream he left his body and entered a whirlwind. As a whirlwind he entered Castle Snout, in search of the sorcerer. He eventually finds the sorcerer, and a beaker that holds Little Frieda. He gets his body back somehow (it just happens), and climbs into the beaker. Inside the beaker is another world, a watery world. Jack rides a raft in this world and finds totems. The totems create yet another world, with Jack inside it. Within that world, Jack, Mojo, and Dr Mazoola battle Mad Mazoola. They win, freeing Little Frieda. Jack and Mad Mazoola then stand on the edge of that world, and the sorcerer rips that reality open, and Jack leaves through the tear, entering the Velvet Realms. Within this new reality, he finds a pearl dome, within which are a number of green chairs, including one green chair that is empty. Jack sits in that chair, sleeps and dreams. In this dream Jack is waking up from the chair in his living room and going outside, glad to be awake, but we know it is still within the dream because we hear Jack is still snoring. That is how it ends, which raises the possibility that everything that happens after that is just Jack's dream (the idea that Jack's world is of his own making, and that there is no clear difference between the different levels of reality is consistent through the stories).
I think that there is also the possibility that these inner realms are not actually contained within the outer realms, but contain the outer realms. That is, the vehicle for moving from one reality to another, can sometimes lead to a deeper reality. Like pausing a video game, or putting down a book, and having your consciousness return to a containing level of reality that has no objective existence within the contained reality. So the Velvet Realms are possibly closer to the core of being rather than being farther removed from it. And when Jack leaves the house he has thus come full circle, back to the dream of waking life.
But another interpretation (which I favor) is that it is all just one dream (just as the whole audio story is just one story), all travel, including travel between realms is just an illusion, created by the one dream of big-M mind. What Jack gains through these travels is insight, and a personal history of entertaining adventures, but in a fundamental sense he does not travel, just as a dreamer doesn't really travel in his dreams. There isn't any "there" to go to, there is only "here".