Yes I think your understanding is correct. Now you’ll just need to experiment with the options and see what you like best.
Regarding definitive information, you are assuming that there’s a ‘best’ approach to this. There isn’t. What’s ‘best’ is whatever sounds best to you, including downstream overloading of FX if you like how it sounds. The sound of a good overdrive pedal is often desirable, even though by definition something is being ‘over’driven.
The only thing you really want to avoid is digital clipping which I don’t think sounds good to anybody anywhere. And you’ll know it when you hear it. But I’m sure there’s someone who will disagree with that. “Nothin’ I likes better in me mix than a good whack of digital clipping!”