Is it permissible for a man to marry his wife's sister after the first wife's 'iddah has ended, while the first wife is still alive, based on the understanding that what is prohibited is combining them [in marriage] and not marrying the wife's sister in absolute terms?

It is permissible to marry the sister of a former wife after her iddah (waiting period) has ended, because the prohibition mentioned in the verse: (and that you take [in marriage] two sisters simultaneously) is specific to combining them in marriage. The man's relationship with the first wife has already ended by divorce.