That's a very lucid summary of the problem and a very plausible conclusion. I think consciousness arises as a necessary partial self-modeling process in order for us to function rapidly and effectively as unitary organisms. It was further advanced in our evolution by our acquisition of language capabilities, which enable us to function as effective supra-organisms. Consciousness only extends as far as it needs to for our effective behavior as units. Extending it more widely, to minor details of sensation and refle action, would slow it down too much to function effectively on the "big stuff".