Might be too late for you, or you've moved on. When setting up the possible attributes / variations combinations you can get WooCommerce to generate all possible combinations of attributes or you can supply only the valid combinations of attributes.
If you have less than 50 combinations, I usually get Woo Commerce to generate the combinations, then go through and eliminate the combinations which I don't want to use, leaving only the valid ones.
As to your drop downs restricting your choices. It does doe exactly what you indicated.
If you only have certain combinations available, it will only show in subsequent drop downs the options available after the first one has been chosen.