Yeah the RECURSIVE vs ITERATIVE is a bit of a red herring here. As you say, the RECURSIVE keyword doesn't specify the processing but marks the fact that the specification of the query is recursive.
Agreed. I started thinking through Fabien's response last night.
I think a syntax that would fit better within the existing framework would be something like
WITH RECURSIVE t AS ( SELECT base case REPLACE ALL -- instead of UNION ALL SELECT recursive case )
I was originally thinking more along the lines of Fabien's approach, but this is similarly interesting.