Hey, I know the answer! The version of "Recurring Dream" on Afterglow was recorded in the late 80's as part of the Woodface sessions. I know the credits say it was from 1985 but I think that's just a reference to when it was written and originally recorded. I don't think it was remixed for Afterglow, just remastered.
The other version of the song was recorded in the mid-80's and I tend to think of it as part of the first album sessions although it might be from even before those sessions. This earlier version sounds quite different and has no second verse.
I've often been annoyed by the liner notes in Afterglow that lead you to believe the song was recorded in 1985 when it clearly isn't the 1985 version. In my opinion, someone didn't want it to look like the entire Afterglow album was recorded in 1989. They also wanted to note how much older "Recurring Dream" was even though the version on the album was also from 1989.