That's pretty much right Bernie.

But just to clear up the language a little the wing will only return to level when there is a slide slip component. In a turn when we return the rudder to straight the model is left side slipping a little so it returns to level. When a gust tips the model it side slips again and so the dihedral returns the model to level.

The idea of the projected area has been used for a long time but if you think about the wing always producing lift striaght up from it's upper surface then anytime the model tips it HAS to be side slipping. The only time this doesn't happen is when the rudder is displaced to compensate for the bank.

All these explanations are for steady state. Obviously when you first move the rudder or a wind gust picks up a tip there is a few seconds of transition from one state to another.

All this is hard to see on a poly glider because the dihedral has such powerful and quick response but if you ever fly a 4 channel trainer model and try to do your turns with the rudder and no aileron you'll see the small amount of dihedral exposes all these transition conditions much more clearly.