You’d be right in assuming that!
As Moosen’s said, allow a bit of play - then test it out, you should have the hill holder let go just as the clutch takes up some bite. You don’t want the clutch to be fighting the hill holder (too tight). Test, adjust, test etc until you’re happy with how it behaves/feels when you use it.
Looser is better than tighter - you’ll learn how to drive with how you adjust it.
I disabled mine in my L series - had too many sketchy situations when reversing down steep hills I didn’t make it up. I just live without it and don’t really notice any difference really (my brumby didn’t get one so they’re basically the same to drive in that regard).
Cheers
Bennie