Product Reference inside a Product Reference?
I figured this out by using taxonomy terms (categories in commerce kickstart), and then yes, indeed, make a product for each combination. (ive heard bulk product creation can do this, and incase you are dealing with a customer input size (how many inches long do you want it), then check out custom line items and Pricing rules.

Thread on drupal commerce > http://www.drupalcommerce.org/questions/7894/adjust-variation-price-based-next-variation#comment-7566