That's pretty much the gist of it.
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Your ship's in the middle, the angle in front of it shows your field of view your cockpit window (in two dimensions). The target positions on the plane of the scanner are shown relative to your position, and the flagpole shows whether the target is above or below the plane. Very simple, as I said.
(On a sidenote: the scanner is set to show distances logarithmically by default, so might notice that scanner blips closer to you move faster and that the flagpole also grows or shrinks depending on the distance, if the "altitude" of the target does not actually change.)
See that blue area beside the throttle display to the right of the scanner? That's the mentioned sweetspot for the velocity.
To the right of the hologram of your ship are three bars marked "SYS", "ENG" and "WEP", which correspond to the currently available energy for your ships defensive systems (mostly shields, later on you can also buy things like point defense and ECM systems), engines and weapons. The pips below the bars show how much energy is currently allocated to the systems. Two pips is the default, four the maximum. I have to admit I have forgotten what the default key binding for rerouting power is (cursor keys, maybe?), but on joysticks, it's assigned to a hatswitch and on gamepads to the d-pad. And then you simply assign more power by pressing into the direction shown on the display: up assigns more power to the engines, left to the shields, right to the weapons, down resets to the default ("RST" = reset).
You aren't that wrong.
Their main purpose is to be used while docking, but you'll find that thrusters are actually very useful in combat. You can not only use them to "drift" around a turn, but also to avoid slower moving projectiles coming at you, like dumbfire missiles and plasma accelerator shots.
I'm using my Saitek X52 Pro HOTAS flightstick, and I would say that's really the best way to play. You have precise control over all axes (roll, pitch and yaw) and by default have the maneuvering thrusters mapped to the hatswitch on the throttle lever. Other less sophisticated (and expensive) flightsticks should also work very well.
Over the holidays, when I was visiting my parents, I played with an Xbox 360 controller. A good alternative in my opinion, but the simpler presets either eschew yaw controls or left/right thrusters (thruster and/or yaw being mapped to the right thumb stick). There is also an "advanced" controller preset which basically let's you control pretty much everything with the controller, without ever having to resort to the keyboard, but that requires you to memorise a dozen or two button combinations.
Keyboard and mouse is by far my least favourite control scheme for that game, but I have to admit I didn't bother very long with it and never looked much into the customisation options for it.
Flying with flight assist is just simpler and more intuitive. While you can pull off some wild maneuvers by disabling it, it's also very easy to get into a difficult to control tumbling. Without flight assist, you have to counter every control input you make yourself: for instance, when you start to roll to the left, you have to manually stop the rolling by pushing the stick to the right. It would definitely be possible to fly without FA completely, but that takes a lot of practice.