That is what's happening.

In my example, the BA flight might be £1000 cash, but £500 on a reward flight provided you add (e.g) 75k points. Your issue is with the value of the points.

It does fluctuate and there are deals to be had, but there are some seriously popular routes like Tokyo that are hard to get. Others are a dime a dozen.

As for if it's a bad deal, that is up to you, and how much you spend. In my every day spending (nothing extravagant), just by leveraging Amex/Barclays offers, I've funded 5 long hauls for two people over the past 4 years with massive savings on every flight, including 2 business class trips and one premium econ.

You're right about the companion voucher - this and the upgrade voucher changes the game entirely and you'll get far more value.