am I correct that even though it says 800 I will still only be able to read 400k disks with the 512k

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It depends on whether or not the 512k is a 512k or a 512ke. I can't quite see in your screenshot but is there a period after "512k" on the the About the Finder screen? If there is a period, it has the later 512ke ROMs that will support 800k drives. If not, it is a 512k and will only support 400k drives.

Also, a 512ke has a model number of M0001E and the original 512k has a model number of M0001W.