In fact, if you screw up the Sleep Cycle Sequence you don't need to repeat the Setup Sequence. Just repeat the Sleep Cycle Sequence and you should be good to go.Observations (using a M1 MacBook Air):
"Setup Sequence"
External displays only work over HDMI (adapter or hub) if you follow this sequence (1) connect the external display (at this point the display is recognised but stays black); (2) enter sleep on the Mac and wait for the external display to enter sleep mode; (3) first manually wake the external display with external display power button; (4) once the display is awake press any key to wake the MacBook.
"Sleep Cycle Sequence"
Once you've completed the Setup Sequence, if the MacBook enters sleep mode with the display connected, it is not necessary to unplug the display simply (1) first manually wake the external display with with external display power button; and (2) once the display is awake press any key to wake the MacBook.
If you accidentally wake the MacBook first (ie: if you screw up the Sleep Cycle Sequence), you will need to repeat the Setup Sequence to get things back in order.
I've tested these sequences with the MacBook open and also in clamshell mode using a HyperDrive hub with HDMI and a Dell USB-C dock with HDMI. Precisely the same results on both. I've also tested this using a Samsung 4K display and also with a Dell FHD display.
My experience with screwing up the Sleep Cycle Sequence is that either (i) the display stays black and is recognised by the MacBook in system preferences and it is clear that a desktop is created for the display (you just can't see it); or (ii) same as one except the external display is entirely green; or (iii) the external display is not recognised at all (this is most rare).