Please help me understand this

On my never-ending quest for car knowledge, I have developed a few questions about manual transmissions. Now, I do not own a manual, but I have a basic understanding of it.

This is what I know. In first gear, the rpm climbs quickly. With each sequentially numbered gear, the rpm drops, thus easing the stress on the inner parts, right? I have noticed that when this happens, the gears feel like they spin more 'freely'. I'm not really sure why, but it does.

Engine breaking, allows you to downshift from a high gear, to a low gear. When this happens, it feels like the wheels become 'restricted', thus slowing down the car.

I know these two things happen, that's a fact. And I've thought about this a lot, and I want to make sure I understand it correctly (thus why I'm asking you guys). From what I figure, the gears have different circumferences, right? If so, would it be that the lower gears has the larger circumference and the higher gears have a smaller one, and this is why the rpms differ with each gear?

Also, since I do not own a manual car, would there be an appropriate time to not use the highest gear? I know 1st is for getting the car quickly going, 2nd is for a slow start (for winter and such), and the highest gear (usually 4 or 5) is best for good mpg. But what about the other gears? I've wondered this because my automatic has go into 4th (overdrive) and 3rd (drive), and I know 3rd gear 'restricts' movement of the wheels, so if a dirt road has a lot of rocks of it, I tend to go to 3rd just to be safe (if I take my foot off the gas, it naturally slows down); is that ok?

Sorry if I didn't use the proper terms and such. And I'm always eager to learn more about cars, this is the next step in me being a full-fledged gearhead. If there is anything else you think I should know, I'd love to hear that too.

Thanks