Why does dry ice produce a cloud that looks like smoke?

Answer: The escaping carbon dioxide is so cold that water vapor in the air condenses.

The escaping carbon dioxide is so cold that water vapor in the air condenses. ✓ — Correct! Dry ice is solid carbon dioxide, and it turns directly into cold gas. That cold gas chills nearby air, and water vapor in the air condenses into tiny droplets. The white cloud is condensed water, not carbon dioxide gas itself.

The escaping carbon dioxide turns into tiny liquid droplets as it leaves the solid. — Wrong. Dry ice changes directly into carbon dioxide gas, so it does not form liquid droplets here. This idea gets the cooling part almost right, but the droplets come from water vapor in the air, not from carbon dioxide turning liquid.

The solid dry ice breaks up into fine frozen dust that floats in the air. — Wrong. Dry ice does not release frozen smoke or dust; the solid changes directly into gas. The idea of solid bits gets almost right that dry ice is solid, but the visible cloud is made of water droplets, not dry ice particles.