As far as I'm aware, "Chill Out" is definitely "live", and recorded in the way as previously noted. There's an interview on klf.de where Bill (I think) mentions that sometimes they'd get to the forty-minute mark and something would go wrong and they would have to go back to the start of the session and begin again ...
Bare in mind, "Space" was also meant to be recorded in just one working week (Jimmy: "I started on the Monday morning, and by Friday evening I was done") which I presume would be a lot easier if you've got Orb DATs to work with originally.
The 'Blue Danube' mix appears in the footage of the KLF live at the September 1989 Chipping Norton Rave (later released, in expanded form, as an EP by PVC) and September 1989 was when KLF5R was released, iirc. There's also the early "demo" of 3AM called "Mommie Don't" which appears on the first edition of "Orbsessions 1" - it was clearly something all three (Bill, Jimmy and Alex) were all playing around with in the second half of 1989.
"Madrugada Eterna" also appears officially for the first time in autumn 1989, on KLF010CD, and was literally recorded "live at Trancentral" (at a party with Graham Lee improvising the riff) so there definitely would have been opportunity to release a "Live @" album instead, based around experimental tapes done at the time .. Both "Chill Out" and "Loving U" could arguably have this alternate title, too ("Loving U" is so "live at Trancentral" that you can apparently hear the electric clicks caused by Cressida turning on the 55 Jeffries Road washing machine halfway through the recording).
Finally (I promise) both "2001:A Space Odyssey" (I'm pretty sure it's that soundtrack's version of Strauss that's used in the "Blue Danube" 3AM remix) and "Apollo" (the NASA documentary soundtracked by Brian Eno, which features briefly at the end of "WTIL (Live at Trancentral)") were both on television - Channel 4, specifically - in about February 1989. I remember watching 2001 myself then. I get the impression that these two films, and their soundtracks, had a big effect on the whole "chill out"/ambient house scene that Jimmy and Alex were creating.
Anyway - this is probably a case of tl;dr - sorry! It's early in the morning, and I'm probably rambling. :-)
John