Debian repos are not my forte, but yes, the correct URL should be just "http://repository.maemo.org/extras-devel". The name is strictly for your reference, and has no bearing on anything in particular. The "dist" field should be diablo in this case - it stands for "distribution", IIRC, and is usually set a name/number/code for the current distribution version you are using, so that multiple versions can be in the same repository system at a time. (Just like Ubuntu still provides packages for older releases in the same place as the latest release.)
The "components" field is a way that the repo maintainers have of logically separating packages in a repo. In this case, the "free" section contains* "Free", e.g. Open Source packages, and the "non-free" section contains Closed Source packages. If you don't want proprietary software, then you can just omit the "non-free" bit. (You can do the same for Extras as well, if you care to - it works the same way.) Some repositories will have different sections names, such as (off the top of my head) "user" or "main", so it won't always be the same.

*I think this was the intent, but I can't actually vouch for that. You'd probably want to ask someone like Jeremiah or Stskeeps if you have specific questions about how [the] repos are run.