This isn't really going anywhere, but I'll have one last go.
Yes, the argument falls over if you excise (ii).
Likewise for the following argument:
(i) All humans are mortal;
(ii) Socrates is human;
Therefore,
(iii) Socrates if mortal.
But the most famous of all syllogisms is not, therefore, a circular argument.
In your dialogue, someone asserts that you can't make that judgment without reading it. Pawsplay asks for a reason. Someone offers one, namely, that you cannot judge its worth without familiarity. Pawsplay asks how to become familiar, and is told that you can become familiar by reading it. There is no circularity. Each of the italicised propositions is a distinct proposition. The first such proposition is the conclusion of the argument. The second two are the premises. Each premise contributes to the argument, but neither entails the conclusion in isolation. What more do you want from an argument, besides the truth of the premises?