So V1 is 'raw' and later cortices have performed more processing on the data causing it to be higher level, which in turn makes it harder to translate it back to a visual?
Yes that's more or less the picture. The extraction of images from V1 has been performed before, the novelty in this paper is that they reconstruct motion too. In the case of dreams, the flow of information is in the reverse, higher level areas projecting to lower level, creating the illusion of vision. It's not yet known if an actual image is formed in low level virtual cortices from dreams.
So V1 is 'raw' and later cortices have performed more processing on the data causing it to be higher level, which in turn makes it harder to translate it back to a visual?