Your assumptions are correct. Now let’s fill in the blanks.
The Universal Disc Format (UDF) is the native DVD file format. ISO 9660 is an older standard developed for CD-ROMs that is still used on DVDs alongside UDF for wider compatibility. Some details on both specification are available at Optical Storage Technology Association’s site. See the DVD FAQ on DVD Demystified for OS compatibility information.
The practical implications for you are that from the list of Nero DVD templates (that’s what they are called, “burning options” is not quite accurate) you listed above there will be no difference between ##1, 5 and 6 - unless you want the discs to be easily readable on older platforms like Win95 without having to install third-party tools, in which case you can pick between ##1 and 6.
So pick any template you like but keep in mind that DVD-ROM (UDF/ISO) should offer the widest compatibility. The DVD-ROM (Video) template uses both UDF and ISO, incidentally.