Your expectations are on correct lines, once you analyze the Matches and find them fit to be merged then you can change the AutoMerge indicator to 1 this way when you run the AutoMerge Job , they would get Merged.
The workaround holds good but it longer run it is always advisable to tune your Match Rule Set in case you are seeing lots of unwanted matches getting generated.
Also while cancelling the Tasks from C360 UI , you should cancel them directly using option "Cancel Task"
Don't select the option as "Not a Match" and then "Cancel Task", that way even though the tasks would get cancelled in C360, In AvoS, the process would get faulted. This is a known issue MDM-37881 and the Workaround is to use "Cancel Task" option directly.