My comprehension is that the pass/fail cycle sets the resistance for the contest: which might be extended or simple and lasts throughout the contest (which in the case of a simple contest is just one roll).
Note that because the pass/fail cycle depends on level of victory/defeat it could not apply to the results of an exchange in an extended contest, which give a result as a number of points for or against and not a victory default.
Similarly the consequences of the whole extended contest are what give the results you use to figure out the next resistance from the pass/fail cycle.
Incidentally we tend to drive with the pass/fail cycle setting resistances and have done for some time. We find it is very effective for storytelling gaming.
The reason is that unlike a pre-plotted adventure we are usually creating encounters in an improvised or on-the-fly fashion from one-line 'bangs'. Using the pass-fail cycle helps us keep resistance pacing in that circumstance.
Great stuff and a really valuable tool.
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