I love any fic where Holmes is pining/dreaming and looks up and realizes the real thing is there for the asking.

I thought it could be taken as EITHER first-time or established-relationship, and it seemed possible to interpret that the "encounter" with Watson, after Holmes was (supposedly) awake from the ball-dream, was also a dream.

I have to say, it doesn't sound much like Granada (Brett-Hardwicke)? It put me more in mind of the Ritchie-movie-verse.