You are pretty much right Booky. I'll even add, if the video card lacks the processing power of the main CPU, then the use of hardware T&L will reduce game performance.
For instance, if you have a 1.8Ghz (or faster) Northwood P4, there is only one video card on the market that has a GPU fast enough to make sense using T&L, and that is the ATI9700Pro, everything else is too slow, as compared to the CPU.