The 3 document types was a little confusing to me when I first started also. If you define your processing rule at the transacton set level (your X12 850), it will be invoked for every transaction. If you define it at the Envelope or Group level, it will be invoked just once which is a little cleaner (and less costly especially if you’re using a VAN). We create our EDI rules for the X12 Group.
Chapter 4.3 of the EDIforTN manual explains how to create the external IDs for each of your partners. You must ensure that these IDs and qualifiers match the IDs and qualifiers in the ISA and GS segments of your EDI documents, otherwise Trading Networks will ignore the document.
When you create the processing rule, on the Criteria tab you need to specify the Sender, Receiver, and Document Type you want that rule to act on. Then on the Action tab you can specify how you want TN to handle the document. For example for inbound EDI documents, you would probably click the Execute a Service box and choose the flow service you created to translate the document. Or for outbound EDI documents you might click the Deliver Document By checkbox and specify how you want TN to send the document.