Prob should have mentioned that the flash was not on manual it was on ETTL.
This doesn't really matter in regards to your question. You asked why the flash fired even thou the photo is overexposed. My answer is still true, it fired because it was up and when your camera's exposure mode is in manual (or aperture or shutter speed priority) then the flash will fire. How bright the flash is when it does fire is a function of the flash setting (manual or ETTL). manual flash and manual exposure are two different things, as you said.
So, the flash exposure would have worked out correct flash for the scene (via ETTL) regardless of what the cam was set to (shutter / aperture) and hence fired to light the scene as it sees fit. All makes sense now
Essentially yes, but flash works out the correct exposure for the flash exposure - which is dependant on the composition. Flash will generally only effect the foreground - so it tries to get that properly exposed.
You're getting there