Hi Geoff. Yes you are correct in all your thinking. The local HI-DEF stuff can be picked up over the air in the same way as traditional analogue using the same antennas and sockets. The website from pin shows the areas that can pick it up (because it is not quite as extensive as analogue at the moment but pretty close).
The now HD box has an antenna input to pick up the local HI DEF stuff and the ethernet input to pick up the Now stuff. There is one HDMI output to the TV for both. If you ever cancel Now TV in the future, you can still use it as a normal set top box for the local channels.
If there are no promotions at the moment, you can buy the box outright for $890, or you can rent it for $38/month.
You do not need to purchase a single HD channel from PCCW to get the box. I find the channels are too expensive at the moment and they only have a couple anyway.