I think there are two things here that could be updated to get this working the way you would like it.
The first is getting past the select list having a value for each entry. If you use the required not blank validation as the trigger then you must have one of the triggering options in the list not have a value, otherwise it would never fail validation. To get around this you can use the other select list compatible client side validation of regular expression. With this validation you must come up with a regular expression that will account for the value that you are using for the field. An example of an expression that would detect a 1 for the select list would be:
With this regular expression validation it would be triggered if the value contained just 1.
The regular expression validation is covered more thoroughly under the Validation Toolkit help from within Dreamweaver.
For the second issue with the validations occurring for the hidden form fields you should be applying the conditional validations to account for this. If the validation that determines if one value was selected over the other fails then only validate the appropriate element. It would essentially be very similar to the show hide set of validations that you have. What this would do is allow the other elements to be validated based on weather or not the triggering validation was activated. This is also discussed more thoroughly in the help documentation.