In my fourth year of my PhD on schizophrenia and I'm currently writing up my thesis. I'm procrastinating right now so thought I'd do something useful with what I've been studying.
And no, schizophrenia is not multiple personality disorder.
Edit: I have to get dinner and run some errands. I'm really enjoying this so I will definitely get back and answer the rest of the questions.
Your interpretation is mostly correct, in that sensory attenuation helps to distinguish between sensory experiences as coming from the inside or outside, and that schizophrenics show a deficit in that part.
And I couldnt agree with your last part more. I talk with people with schizophrenia and it's heartbreaking to hear of their life stories. They all had hopes and dreams and most were just entering the world after school (since onset is normally during young adult years). It's sad to hear how much the illness derailed their life.