Below is my reply and I want to thank Dr. Conrad for allowing me to use the pictures of his collections here.
I think your reading is correct unless there are other alternatives. If it is true, 縦目 could mean looking forward with protruding eyes. This is an common expression in Chinese literature but its meaning is not clear until the discovery in Sanxingdui in 1980s about masks with protruding eyes. See the link https://en.wikipedia.org/wiki/Sanxingdui. 劫帰 could be a short hand for 萬劫歸一,which could mean a return to the origin after sufferings in myriads of kalpas. Then the question is why he wrote this.
You are right to date it to 1656, more precisely the second month. I pulled out his biography in the year of 1656 (see below) and in the second month, he offered dharma transmission to his longtime follower Xu Changzhi 徐昌治,a gentleman from Yanguan 鹽官 county, zi Jinzhou 覲周. I mentioned him briefly in both of my books. Remember the controversy about his book Wudeng yantong 五燈嚴統 is not over yet and he was obviously very depressed but hopeful at the time. So his verse could be his expression of hoping to overturn the adverse situation. His verse then could mean the truth of Bodhidharma's coming from the west can be only looked for after many kalpas returning to one, or the true original existence. Of course, he meant his reputation would be rehabilitated for discovering the truth after being defeated in the court. The events listed in this year also shows some of his opponents actually visited him to show their remorse. This is only my guess. He could have written it for Xu Changzhi or even to Yinyuan Longqi 隱元隆琦. If you get this in Japan and there are many bearing similar dates from the same period, it may indicate that Yinyuan's envoy was visiting Feiyin around this time and they simply collected or requested Feiyin's writing as credentials for Yinyuan's orthodox transmission in Japan. Then they returned quickly to Japan with their collections. During this time, Yinyuan was "detained" in Fumonji 普門寺 under serious suspicion from all, including authorities and ordinary Japanese monks. So he needed something from China to prove his reputation and prestige.
There is reason for Chan monks during this period to count from Nanyue rather than Linji to avoid overt sectarian rivalry in China. Feiyin was just challenged because of his genealogy book, this might be the reason that he used Nanyue to identify himself. But his seal is still orthodox Rinzai.
Here is the excerpt about what he did in the second month in 1656, followed by the entire entry for that year. Sorry, it is not punctuated.
二月鹽官覲周
J26nB178_p0190c29║ 徐居士來省覲周于天童金粟徑山諸禪席靡不
J26nB178_p0190c30║ 追隨嚮往究心本分機緣相契付如意一柄表信
十三年丙申
J26nB178_p0190c26║ 師六十四歲正月淨慈寺無生公來述三宜和尚
J26nB178_p0190c27║ 為嚴統事托某備申其意願與和尚面陳懺悔師
J26nB178_p0190c28║ 示答語存別錄付具足備天則琛二月鹽官覲周
J26nB178_p0190c29║ 徐居士來省覲周于天童金粟徑山諸禪席靡不
J26nB178_p0190c30║ 追隨嚮往究心本分機緣相契付如意一柄表信
J26nB178_p0191a01║ 三月師赴鹽城請舟次金山登覽賦二絕以志勝
J26nB178_p0191a02║ 概四月四日進永寧院佛誕日鹽宰賈公外翰劉
J26nB178_p0191a03║ 公總戎孫公及諸紳虔請上堂遂于此開戒三旬
J26nB178_p0191a04║ 劉一齋名若審博綜內典往來甚密設七問師立
J26nB178_p0191a05║ 答之王筠長名之楨射陽人望也皈依執弟子禮
J26nB178_p0191a06║ 嘗持宋丞相陸秀夫傳乞語跋之作宋份臣蔬枰
J26nB178_p0191a07║ 詩一章吳門縉紳內翰子美沈公繹堂沈公甲傍
J26nB178_p0191a08║ 陸公文衡申公繼揆繆公慧遠金公世渼暨眾檀
J26nB178_p0191a09║ 護敦請住堯峰師受請五月辭眾返棹先是興化
J26nB178_p0191a10║ 育長者黎太沖延師至家菴祖孫父子殷勤叩道
J26nB178_p0191a11║ 出所著頌古一冊乞鑒定求序師見其端莊鄭重
J26nB178_p0191a12║ 于本分相契欣然作序復托菴僧岷山公過鹽城
J26nB178_p0191a13║ 致請再過其家以本分砥勵三日而別還虞嶺趙
J26nB178_p0191a14║ 公景之兩致書問道師並答之復嶺南左轄曹鑒
J26nB178_p0191a15║ 躬問候請益書九月朔師進堯峰院萬指繞座薦
J26nB178_p0191a16║ 紳顧松交姚文初趙明遠沈匡來周子佩文孫符
J26nB178_p0191a17║ 及琴川檀信帆檣交映緇素駢闐初八日三宜和
J26nB178_p0191a18║ 尚造謁盤桓自陳懺悔之意靈巖繼起禪師同張
J26nB178_p0191a19║ 司農有譽到寺躬賀次日入城中輿公請瑞光上
J26nB178_p0191a20║ 堂聽法者凡數千指并答候三宜和尚暨剖石禪
J26nB178_p0191a21║ 師設供掃萬峰寶藏二祖塔十月起期龍象雲臻
J26nB178_p0191a22║ 檀度響從冠于今昔分五堂安禪眾舉龍華韜明
J26nB178_p0191a23║ 宗資福天水廣為秉拂首座東蓮古峰然為秉拂
J26nB178_p0191a24║ 西堂宗風大振仲冬苕溪孝廉嚴三求公來參應
J26nB178_p0191a25║ 接機契師遂撾鼓上堂以揚其德喜賡王公復來
J26nB178_p0191a26║ 參於此道甚有染指亦上堂表揚之臘月吳門乾
J26nB178_p0191a27║ 三法師素以才華自負後披剃博覽教乘淹貫台
J26nB178_p0191a28║ 教受無盡大師衣氣概頗異不通名字到寺見師
J26nB178_p0191a29║ 師與談論窮辨一晝夜見其所蘊理致不謬且云
J26nB178_p0191a30║ 和尚當今為宗門第一人故來相見次日上堂接
J26nB178_p0191b01║ 引之又以宗乘中事追拶機緣并上堂語載錄中。