Robert --
Neither of your assumptions are even close. The answer is "No" to both of
them.
To set up Manged Time Periods you must certainly set up timesheet periods,
as you have done. But you must also select the "Restrict updates to Project
Web Access" option and the "Time entry by Timesheet only; Users will sync to
update tasks" option on the Task Settings and Display page in PWA. When you
select the first option, you prevent project managers from manually entering
progress against tasks in their Microsoft Project plan, except for Milestone
tasks. This means that all progress must come from PWA. When you select
the second option, resources enter time and task progress on the My
Timesheet page, and then import the progress to the My Tasks page by
clicking the Import Timesheet button. After a resource imports timesheet
data to the My Tasks page, the resource cannot edit time on the My Tasks
page. That is what constitutes Managed Time Periods.
When you have Managed Time Periods enabled, the PM can use the "Sync to
protected actuals" feature to make sure that he/she has not accidentally
entered actual progress in the Microsoft Project plan, but instead, has
accepted all progress into the project from PWA. Now, here's my question
for you: Do you really need the fucnctionality described above? It creates
a very restrictive environment for everyone involved. Hope this helps.