To better illustrate the question, consider the following simplified form of block recursion:
__block void (^next)(int) = ^(int index) {
    if (index == 3) {
        return;
    }
    int i = index;
    next(++i);
};
next(0);
XCode (ARC-enabled) warns that "Capturing 'next' strongly in this block is likely to lead to a retain cycle".
Agreed.
Question 1: Would the retain cycle be successfully broken by setting the block itself to nil, in this fashion:
__block void (^next)(int) = ^(int index) {
    if (index == 3) {
        next = nil; // break the retain cycle
        return;
    }
    int i = index;
    next(++i);
};
next(0);
(Note: you'd still get the same warning, but perhaps it is unwarranted)
Question 2: What would be a better implementation of block recursion?
Thanks.