Hi,
Yes, that is correct. This means to avoid connecting wan0 and lan0 to the same LAN or VLAN. To be more precise a switch that does not run spanning-tree. Wanos is a two port switch. The same care when connecting a switch to the network must be taken when connecting Wanos.
To recap yes, the pfSense needs to connect to the wan0 side and the rest of the network to the lan0 side. This could be simply to connect the pfSense directly into the wan0 port and lan0 into the switch.
Alternatively, when connecting both lan0 and wan0 to the same switch: wan0 and pfSense could be connected to a VLAN X and the rest of the network and lan0 can remain in the default current VLAN. The Wanos switch then becomes a Layer2 gateway for traffic between the LAN and the WAN.