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Your understanding is 100% correct. You have written a very clear and very succinct summary. To set the key, be guided by the notes that are being used to write the melody. For example, if you write a song in G Myxolydian mode (such as The Beatles "Norwegian Wood"), the notes are G A B C D E F G. That is, the notes of the C scale form G to G. This indicates that setting BIAB to the key of C major is probably the best option rather G major (with F#) or G minor (with Bb, Eb, F# (raised 7th)).

Whoa, I never would nave thought of this either! Really good thing to know about modal progressions. Thank you! I am getting it. BIAB thinking melodies while I am thinking chords.