From the Sweet Dilemma T&C's:

4. Free Nights Promotion: The Free Nights Promotion is: One free night at participating hotels for every two Qualifying Stays paid and stayed at any IHG hotel worldwide (except in Asia Pacific countries), including InterContinental® Hotels & Resorts, Crowne Plaza®, Hotel Indigo®, Holiday Inn®, Holiday Inn Express®, Express by Holiday Inn™, Staybridge Suites®, and Candlewood Suites® hotels (the “Free Nights Promotion”), between September 20, 2010 and December 31, 2010 (the “Promotion Period”). Registration into The Free Nights Promotion will end on December 20, 2010. Members registered for the Free Nights Promotion who have completed the appropriate number of Qualifying stays will automatically be emailed of notification that they have qualified for a free room night at participating hotels (“Free Night Notification”). The e-mail will be sent to the email address that is on the Priority Club Member Profile at that time. Member must maintain current, valid email address in Member Profile to receive Free Nights Promotion communications. The free room night includes only the room rate and applicable taxes (“Free Night”). Free Night Notifications will be e-mailed beginning on or about November 1, 2010; date of e-mail will vary based on check-out date and when the stay is recorded by PCR. Allow up to 14 days from check-out for receipt of Free Night Notification.
5. What is a Stay? A “Stay” is defined as one night or consecutive nights at the same hotel, regardless of frequency of check-in/out.

Note my bolding, this appears to confirm that you would only get credit for one stay anyway.

J