Your understanding is correct. GPRS < EDGE < 3G < HSPA.
HSPA = HSDPA (High Speed Downlink Packet Access + HSUPA (High Speed Uplink Packet Access)
The difference between the three lies in the bands i.e. frequencies they use to communicate with the network. Edge uses the same frequency as the phone uses to transfer voice and SMS to the network. Hence, you may notice (atleast I have), that the E symbol will disappear when you are on a call - assuming that you have selected
Use only 2G networks
To answer the last part of your question, I usually keep my networks on
3G/WCDMA when I know I am going to be near a charging point. I can go nuts with my data then. However, when I am travelling, and network coverage can be sparse, I force the phone to use
GSM only which in your case is
Use only 2G networks. This saves a lot of battery, simply because its more battery intensive for the phone to communicate over the 3G radio, rather than the 2G.
Edge can be pretty decent, if you just need to be online on Gtalk, Watsapp, and need to reply to some lightweight emails. It does the job. 3G or HSPA, is necessary for more intensive applications like Dropbox, Youtube, or one of those streaming music services that I can't remember at the moment.