....
The insert holder I got was a 1.25" diameter R8 unit with 2 triangular
inserts. I understand from the minimill old-timers that this is the
appropriate size and the machine has sufficient power to drive it.
What I don't understand is, for what operations or projects is this the
most appropriate tool, as opposed to a 4- or 2-flute endmill, or a
flycutter? Is it the thing to use when you want to cut a finish surface
on a 4" square block? Or is it better suited to bulk metal removal, such
as to make that block 1/4" thinner?

This is one of those things you'll have to just try on your machine. On my
machine, I use insert endmills for almost all jobs that can use a large
endmill. If you have finish problems, most likely chatter marks, then you
won't be able to use it for finish cuts. If your machine can handle the
cutter, you can remove metal far faster.

Karl