All in all, is this generally how a board works?
Not sure of what you are really asking here.
How a board works is largely up to how the owner wants it to.
If you are asking about the convoluted setup of Moderators and permissions, then the answer is that most forum software attempts to provide enough flexibility to meet whatever the owner needs/wants. What the owner does is up to them within the limits of the software's functionality.
In any software environment, permission sets are strange animals with a mind of their own. The law of unintended consequences can jump right up and take a large chunk out of your backside in a hurry. For security's sake (not to mention major embarrassment), you should ALWAYS test your permissions setup in a test environment to be sure it works as intended.
If your question is more wondering "is this normal?", my guess is that it is not very. To suddenly start promoting seemingly random members to Moderator status is not what I'd call a good move. It has a strong potential to cause discord among the members. Especially if you get some joker who is just chomping at the bit to flex his/her new-found e-muscles. The chance of this grows exponentially with each new moderator. Especially when they ASK to be one.
