Hehe, now I'm not the only one confused.

Okay, here goes. In your web.config there's two ways (maybe more but these are pretty much the standard) you can set Authentication. Forms or Windows. With the AD Provider the site is still using Forms Authentication but it pulls in the users Windows credentials and checks it against the Active Directory to see if the account is valid. If so then it creates/logs in the account into DNN. So the site is still running under Forms Authentication.

For DNN 4.8.2 you need the 01.00.03 version of the provider.  I just got notification that it's been completed all the steps in the Release Tracker (except for some final steps I need to do) and you can download it from http://www.dotnetnuke.com/Products/Development/Forge/Authentication/Downloads/tabid/852/Default.aspx. If for some reason that link isn't working (one of my final cleanup steps is to verify that the link works) you can also get it from http://dnn.gmss.org. You can also get the latest documentation from the second link and I'll be updating the project page with the documentation either tonight or tomorrow.

You've run into one of the outstanding bugs that's been around longer than I've been associated with the provider that I haven't found a way to fix yet.

Automatic logins don't work for the first initial login into a portal that isn't PortalID=0. If a user manually logs in with their windows credentials under Login->Windows Signin then their account is created and they should be automatically logged in from then on.

Yes that should work. I'm working on a bug that has popped up for 4.8.2 with manual logins and if I get time I'm going to try an idea that I have for the child portal problem. Not sure if I'll be successful or not but I've got my fingers crossed.