Making a square and cutting two diagonals is the correct way to make setting triangles so that the straight of grain (not the bias) is on the outside edge. I think your pattern is correct, and you shouldn't have any problem with the sewing if you're careful not to stretch the bias edges while you're sewing them to the interior blocks of the quilt. The corner triangles are made by cutting only one diagonal through a square of a different size. Look at the pattern again and see if this makes sense to you.