Yes, you understand the concept of standby correctly. When standby is opened in read only mode, it can obviously not be in automated recovery mode at the same time, so when you return it from OPEN READ ONLY to automated recovery it must apply all the arch redo logs that were transfered from the primary database in the meantime, but everything is totaly automated and transparent for you.

If you are using 8i Enterprise Edittion then I would definitelly use standby in your situation. In 8i EE the administration of standby is realy extremely simplified, certainly more simple than recreating another database from your production database every morning. And it brings many additional advantages (no need to backup primary database if you backup standby, can be used for early block corruption detection, etc...).