I'd say you're right. I'm no wiring expert, but I have done many, many repairs & mods over the years.
The way I see this illustration, the switch is upside down. The top 2 contacts (in the red oval) show the signal path with the switch 'down' in a normal position. The 'hot' (pickup signal) passes thru both the T/B and the resistor on it's way to the short black wire that feeds the volume control to the output to the jack.
When the switch/knob is 'up', it only goes thru the T/B on it's way to the volume pot, giving full signal like a standard setup.
If I'm wrong about this, please educate me!
That being said, the stock setup sounds pretty good imho, but I prefer the simplicity of skipping the push/push...