1. Am I understanding this right?
2. If I am, then why would we expect this to continue in the future? Now that the research is public, shouldn't this be priced into the stocks going forward?
#1) Not completely. Small/value stocks are more volatile than larger stocks. However, from a mathematical perspective, their historical returns have more than compensated for the additional volatility. Additionally, small/value stocks don't always have horrible years at the same time as the overall market, and therefore adding a tilt has frequently reduced volatility at the overall portfolio level. For example, small/value declined less than the overall market in both of the most recent large bear markets.
Of course, this could change in the future--in future bear markets small/value certainly could decline more, which would make the overall portfolio more volatile.
In general, tilters generally believe that adding small/value does increase the riskiness of the stock portion of your portfolio, and as such, they will usually increase their bond allocation slightly to compensate.
#2) This is generally the most entertaining debate on Bogleheads, IMO. The problem is that nobody really knows why the effect occurred historically. It could be because they are riskier, beyond even their added volatility. It could be that investors have consistently mispriced these securities. It could be that economic circumstances unexpectedly favored these companies a few times that resulted in overall outperformance. It could be a statistical anomaly due to liquidity/trading issues that no longer exist. Reasonable arguments are made in favor of various combinations of these conclusions.
As such, you'll never arrive at a certain conclusion as to whether these stocks will outperform in the future. That's part of the risk of trying to "beat the market." At the end of the day, the argument really comes down to whether you expect historical backtested results to persist in the future--will tomorrow be pretty much like yesterday? Historical backtesting really is the best information we have to go by, but it's limited by the fact that it's a) theoretical (i.e. nobody actually invested like this for the past 100 years) and b) the future is unpredictable.
Regardless, your original question is whether you should consider a modest tilt in a small/value direction? I say, sure, why not, as long as the tilt is modest. If you're not sure, make a plan to move to your desired allocation over a 3 year period. During that time, read more, read some of the old debates here, join in new ones, and review each year whether you still think that a tilt makes sense. If you decide a year or two from now that you don't think so, you won't have made what you have come to believe is a huge mistake. On the other hand, if it makes more sense to you as time goes on, you'll end up with your desired allocation and more importantly, you'll stick with it for the longer term.