[andruby]

My assumption was the each individual led chip will re-transmit the signal to the next led, which in effect will turn the 3.3v signal into a 5v signal between the 1st and subsequent leds.

The power lines do sustain voltage drop over longer sections, so you'll want to add extra power every few meters.

[fullstop]

Right, that is exactly how it works. If your signal to the first IC isn't perfect, and it isn't with a 3.3v signal, you can end up with incorrect colors or shifted patterns.

As you add more LEDs you have a greater chance of one at the end not lighting up or having incorrect colors throughout the string.

0.7 * 5v == 3.5v, and 3.3 < 3.5. You're out of spec for the part and can't expect it to work reliably.