Your understand is not correct, but it is close.
The 110 has a line port and a phone port. You connect your AT&T incoming line to the line port, then you connect the phone port to EITHER a phone or the wall jack, powering all your phones. If you plug it into the wall jack, every phone can then CHOOSE which line it makes the call out on, SP1, SP2 (both VoIP) or the AT&T line. Simple instructions on how to choose for every call.
You cannot do that AND have a dedicated VoIP phone. Only one plug on the OBi 110.
In order to do this, you need to disconnect the AT&T line coming in from feeding the entire house, and just feed the OBi. I, and others, have posted instructions on how to do this. The key is you can't have a live jack fed by AT&T and then plug the OBi's phone port into it.
Another option is to leave the AT&T wiring alone, and plug in a wireless phone base into the OBi, which then powers multiple handsets around the house that aren't plugged into anything.
If you need reference to the posts I mentioned, let me know.