It's the only supported way, but there are obviously other ways to do it. Developers install and reinstall local packages all the time from the command line.

You can't install it from your PC, though, it needs to be on the phone.

I'm not going to give more specific instructions here but look at documentation on the debian package system. That's what maemo uses--but with maemo-specific repositories and software.

Note that only the packages available in extras have the quality assurance testing done to make sure they don't fill up your root partition == bricked phone for typical user or drain your battery quickly. The same goes for the method of installation (using built-in package manager).

Edit: in response to your edited questions, read the wiki article i linked and the extras wiki. That has the answers to all the questions.