The OPs basic understanding is correct.
I politely direct you to the FAQ, and a number of other threads historically; this is a fairly common complaint of MPC members in this forum.
And the reset function is another reason GO and DM are so hard to obtain for "regular" frequent fliers... especially those looking for a quick shot to high tiers from scratch. It's pretty straightforward that you could handidly earn EXP in AA and Gold BA (both OWE equivalents), and yet struggle to get Cathay GO (OWS), let alone Diamond.
Everyone shakes their head the first time they do the math. But it's pretty "normal" on here given how often the query comes through. That's just the way they do it.
They make it hard for us to earn, but more than give it back to us in favorable earn/burn ratios, treatment above other partners, etc.....(sarcasm detected...)