$\newcommand{\span}{\operatorname{span}}$TL;DR version: Specifically, (if we let $\mathbb{K}$ equal $\mathbb{R}$ or $\mathbb{C}$ as appropriate), then $\mathbb{K}^3$ equals $$\left(\span\{(1,0,0),(0,1,0),(0,0,1) \} - \span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0) \}\right) \cup (\span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0)\})\\ \cup (\span\{(1,0,0)\})$$ So when we take the equivalence relation $\sim$ to get the projective space $\mathbb{KP}^2$, we get that $$\mathbb{KP}^2 = \left(\span\{(1,0,0),(0,1,0),(0,0,1) \} - \span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0) \}\right)/\sim \\ \cup (\span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0)\})/\sim \\ \cup (\span\{(1,0,0)\})/\sim$$ and ostensibly (hopefully) we have that $$\left[\left(\span\{(1,0,0),(0,1,0),(0,0,1) \} - \span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0) \}\right)/\sim\right] \approx \mathbb{K}^2 $$ $$\left[(\span\{(1,0,0),(0,1,0) \} -\span\{(1,0,0)\})/\sim\right] \approx \mathbb{K} $$ $$\left[\left(\span\{(1,0,0) \}\right)/\sim\right] \approx \mathbb{K}^0 $$ The third is the "point at infinity" completing the projective "line at infinity" which is the union of the second and the third; then the whole projective space $\mathbb{KP}^2$ is $\mathbb{K}^2$ with the (projective) line at infinity attached to its "boundary", leading to a two-dimensional space.
Similar to (or exactly the same as?) the decomposition mentioned in https://math.stackexchange.com/a/172799/327486
My full overly long thought process: Of course, the above setup in my question ignores the underlying equivalence relation on the space. If one quotiented the plane $\operatorname{span}\{(1,0,0),(0,1,0) \}$ by setting as equivalent any two points with the same magnitude/distance from the origin (in other words $(a,b,0) \sim (c,d,0) \iff \sqrt{a^2 + b^2} = \sqrt{c^2 +d^2}$) I could see how the resulting space would be a one-dimensional manifold (in fact it would be homeomorphic to the unbounded interval $[0,\infty)$).
I suppose it would be simple to set-up a bijection between $\mathbb{RP}^1$/$\mathbb{CP^1}$ and the line at infinity; in fact, this might even be an inclusion, since we can compose the inclusion $\mathbb{K}^2 \hookrightarrow \mathbb{K}^3$ with the quotient map defining the projective space. And I do see how $\mathbb{RP}^1$ is one-dimensional; it's essentially an "infinite circle", which means that the $\mathbb{CP}^1$ should be an infinite sphere. My notes (Algebraic Geometry: A Problem Solving Approach) do confirm that $\mathbb{CP}^1$ is essentially the Riemann sphere, and Wikipedia also says that the complex line at infinity is a Riemann sphere: https://en.wikipedia.org/wiki/Line_at_infinity
I guess is the idea the following? Even if one does have the line at infinity is equal to $$\left[ \operatorname{span}\{(1,0,0),(0,1,0) \} \right] / \sim$$ where $\sim$ is the equivalence relation is the one defining projective space, this isn't two-dimensional, because $$\left[\operatorname{span}\{(1,0,0) \}\right] / \sim$$ is a point, i.e. 0-dimensional, so "adding" the span of $(0,1,0)$ to it only leads to a one-dimensional manifold, because all of the dimensionality comes from all of the different possible linear combinations of $(1,0,0)$ and $(0,1,0)$ which are not related by a scalar multiple, i.e. by parametrizing the set $\{(a,0,0)+(0,b,0) : a,b \in \mathbb{K}, a>0 \} / \sim$ (the equivalence classes of rays starting from the origin which are to the right of the vertical axis, i.e. the first and fourth quadrants) by the angle $(0,\pi)$ they make with the ray $\{0,b,0): b\ge 0\}$, and at least then in the case $\mathbb{K=\mathbb{R}}$ applying the cotangent function gives us back an unbounded object homeomorphic to $\mathbb{R}$, i.e. why $$\left(\left[ \operatorname{span}\{(1,0,0),(0,1,0) \} \right] / \sim\right) \setminus \left(\left[\operatorname{span}\{(1,0,0) \}\right] / \sim\right)$$ is homeomorphic to $\mathbb{R}$ and why then $\left[\operatorname{span}\{(1,0,0) \}\right] / \sim$ is the "point at infinity", and thus the line at infinity corresponds to $\mathbb{RP}^1$, which itself can be decomposed into a line and a point at infinity.
In other words, even though it may not necessarily be clear from its preimage under the quotient map, the "line at infinity" is a projective line "at infinity".
I can image easily analogous arguments for complex projective space, although it is not as easy for more to construct as explicit of a homeomorphism as I did above. (Update: I think the generalization to complex projective spaces could come from considering slopes rather than angles -- we can still define slope for complex lines even if not angles.)
Note: Here what the cotangent function is doing geometrically is essentially giving a one-to-one correspondence between the angle formed by a line and the $y$ axis and the slope of that line. Since characterizing slopes via their lines generalizes better to higher dimensions, it makes more sense to think of the projective coordinate on the line at infinity as corresponding to slope than it does to think of it as corresponding to angle.
Let's try to see how we can quotient out $\mathbb{R}^3$ to become $\mathbb{RP}^2$. "Cut out" the $yz$-plane and quotient it to become $\mathbb{RP}^1$ in the manner mentioned above -- i.e. consider the right half-plane and assign to each line its slope (which was the end result of my angle plus cotangent method above).
Now let's focus on the side of $\mathbb{R}^3$ to the right of the $yz$ plane (i.e. $\{x>0 \}$ ) and show that we can create a one-to-one correspondence between rays starting at the origin and $\mathbb{R}^2$, in a manner analogous to how quotienting out the right side of $\mathbb{R}^2$ gives something homeomorphic to $\mathbb{R}^1$.
For any such ray, we can consider its projections onto the $xy$ plane and the $xz$ plane. Then each of the two projections has a well-defined slope because $x>0$ (for the one in the $xy$ plane, the change in $y$ over the change in $x$ and not vice versa, and for the one in the $xz$ plane, the change in $z$ over the change in $x$ and not vice versa). Moreover, the pair of these two slope values characterizes the entire ray uniquely; thus we get a bijection between $\mathbb{R}^2$ and equivalence class of lines through the origin in $\mathbb{R}^3$ minus the $yz$ plane.
The key to this construction was removing the set $\{x=0 \}$, which is the $yz$ plane, everything else falls into line from this, allowing us to generalize this process to complex projective spaces. (Because the notion of slope also exists for complex lines.)
Thus, if we want to construct the decomposition $\mathbb{P}^n = \mathbb{A}^n \cup \mathbb{P}^{n-1}$, for a real or complex projective space, the recursive procedure is simply as follows: given a coordinate $i=1,\dots,n+1$, split $\mathbb{A}^{n+1}$ into the sets $\{x_i =0 \}$ and $\{x_i \not=0 \}$. Recursively, use this procedure to identify the quotient of $\{x_i =0 \}$ with $\mathbb{P}^{n-1}$. For each ray (i.e. equivalence class in $\{x_i \not=0 \}$), identify it with the $n-$ tuple of the slopes of its projections in the $x_1 x_i$ plane, in the $x_2 x_i$ plane, $\dots$, in the $x_{i-1} x_i$ plane, in the $x_{i+1}x_i$ plane, $\dots$, in the $x_{n-1}x_i$ plane, and the $x_n x_i$ plane, which characterizes the ray uniquely. (And since slopes also are defined for "lines" in $\mathbb{C}^2$ this also works for complex projective spaces.) Thus we can identify the quotient of $\{x_i \not=0 \}$ with $\mathbb{A}^n$. Therefore, projective spaces $\mathbb{P}^n$ can really be thought of as spaces of lines through the origin in $\mathbb{A}^{n+1}$, with their homogeneous coordinates identifying the slopes of these lines in various planes of $\mathbb{A}^{n+1}$.