It seems I can just create a file, put that code in there, set the hosts I want, and then any Peertube can go to Admin - Settings - Configuration - Basic - Search Index URL - and then put in https://ptindex.btfee.org/ . Is this correct?
So, besides the search index/instance index following confusion, you got it more or less right, at least as far as my understanding goes. The concept of that system of being able to choose an index to automatically follow was to make it so moderated and mutually-trusting platforms can interconnect in a self-determined way and publish lists of trusted platforms.
Which, btw, I think many would be super happy for - currently, I don't know of any index like that myself. (Maybe there are some, but if so, not very publicly known/advertised). You basically only get the "official" index, which is only moderated after the fact and all over the place. I'd definitely be up for using and promoting any auto-follow index that's more directly moderated with my instance. (I followed the official one at first to get the bulk of my follows, but it became too much of a pain to moderate).
Also, just in general: Good luck with your instance going forward - and thank you for contributing to the Fediverse! :)
Quick P.S.: I think especially for more technical questions, also cross-posting to [email protected] in addition to here is a great idea. That comm seems to have developed to be a more focused space with less video promotions and better long-term discussion not getting buried by video links.