Take the hits and keep moving forward.

[azguy]

Sounds encouraging. Look, she tried to get a sign from you that you're interested in moving closer:

W: You still thinking of moving to (W town) if you sell it?
Me: Tbh I don't know what I'm going to do.
W: Thought you were wanting to be closer to the boys.

She then is brave enough to tell you what she's been thinking about:

W: I've been thinking about you lately

She even goes further and tells you she is wondering about the future.

This looks very good to me. More importantly, it sounds like a great time to change course from your going dim attempt (I'm agreeing with AS here). It doesn't need to change much. She seems to be looking for signs of whether you're wanting to reconnect. Look for ways to convey that you are.

I didn't quite have the same reaction that AS had about the horny joke. You probably know better than us whether she would take that as a joke, or be put off by it, but it was certainly a risky move, if nothing else.

I wonder if you could find an opportunity to share with her what you think about the future. She seems to be opening the door for a discussion.