[Clipper]

You've got most of it correct, but here's the complete situation:

You have a hand of hidden cards and a set of cards in play which represent your current character. These include your Race, Class, Items and some other Special cards like Really Impressive Title.

Of the cards you have in play, you are carrying all of the Items. Items are cards that have a value in Gold Pieces (including the text "No Value").

You can choose to use or not use any of the Items you carry. Those that you are not using are the ones you turn sideways.

As for your example with the Wizard cards, yes, that's fine. You don't need to play them that way to sell them for levels, as you are allowed to sell from your hand as well, but you do need to play them for trading as that can only be done from the table. Playing cards you can't use that way is also good to avoid Charity at the end of your turn. As for the Big Item question, it doesn't matter if you are using the Big Item or not, you can only carry one of them.