The Composers Hall of Fame would be nice of course, but it would mean he'd have to go there for the ceremony ;-)
But I think you're right: it's maybe his way of saying that the focus has shifted and that the guitar is no longer the main thing.
Actually I'm not sure that he is pursuing to get any prize, although he certainly seems to be enjoying the public recognition he is now getting. He didn't do such a lot of interviews for Tracker, did he?
Especially the music press in the U.K. somehow weren't taking him very seriously as an artist for a long time, maybe because of the "pop music" image of DS, so at least now he is finally acknowledged on the same level as Van Morrison, James Taylor etc.
As far as prizes go, he's already got the Ivor Novello Award, which is probably as good as it gets for a songwriter.
The Nobel Prize is probably not on the cards, because he is (and sees himself as) a songwriter, not a poet like Dylan. And I think for the Nobel Prize they will expect a writer to be more political and outspoken in their views.
But for MK, I think a knighthood for services to music (and to the world) might be a good idea - it's about time