i.e.
On prepare, it would turn all the character creation dummies into NPCs and "Set on stage 0" which is hiding them? Presumably to prepare the npc's for further char creation.
Is this correct?
Yes, that is correct. You may want to have a look at
https://docs.larian.game/Osiris_Overview, where this (and other aspects of the Osiris language) are explained.
The SetOnStage Osiris API has been
documented already.