Yes, you last sentence is correct. At least that's what my 123 manual has for the older 200/220s. Out once for glowing, out again for starting, then let go and it goes to the first out position, then push it to the wall for shutoff.

Oh and the hose going to the butterfly valve is needed for the governor (assuming there's just the one).

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1978 300D, 373,000km 617.912, 711.113 5 speed, 7.5mm superpump, HX30W turbo...many, many years in the making....
1977 280> 300D - 500,000km+ (to be sold...)
1984 240TD>300TD 121,000 miles, *gone*
1977 250 parts car
1988 Toyota Corona 2.0D *gone*
1975 FJ45>HJ45
1981 200>240D (to be sold...)
1999 Hyundai Lantra 1.6 *gone*
1980s Lansing Bagnall FOER 5.2 Forklift (the Mk2 engine hoist)
2001 Holden Rodeo 4JB1T 2WD