Has "dilemma" ever been restricted to two options?

The etymology for dilemma reveals that the original meaning of the word was specific to two (di-) premises (lemmas). In fact, Etymology Online states

It should be used only of situations where someone is forced to choose between two alternatives, both unfavorable to him.

So yes, there are those who would argue that the word is only "properly" used for two unpleasant alternatives. I would speculate that your dictionary has been updated to include more modern usage, which is less specific about the number of choices to be made, perhaps because the "important" part of the meaning is that a person must make an unpleasant choice.

Interesting - I first encountered the expression false dichotomy which I think expresses the intent more accurately despite being slightly pompous. I was then mildly surprised to find the term more popularly written and spoken as dilemma since as you point out a dilemma is not necessarily and certainly not intrinsically limited to two options.

I also prefer dichotomy since by definition it suggests a division into two non-overlapping or mutually exclusive parts, and since conflicting opinions are almost never mutually exclusive - the possibility of mediation presupposes the existence of common ground - it more clearly calls out the contrived nature of such thinking.

It might be cynical but I suppose that false dilemma has been popularly adopted simply because dilemma is close enough, and for the most part ordinary people don't care for precision as much as convenience and familiarity.

First, the words "trilemma" and "multilemma" have been used. I know. I did it in a freshman writing class in 1982-3. They were footnoted with explanation as to their meaning relative to "dilemma". Since I was an avid Latin student circa 1970, using "dilemma" when there are multiple unpleasant choices went against the grain. The adjunct, a bitter wannabe, let these variation pass without comment.

As to "dissection", the prefix in this case is not "di-", meaning "two", but "dis-" meaning apart, as in "discombobulated".