(1) how do you know "what is correct"?

Often I feel it. I also do use a code that involves seeking the path that is most beneficial to those around me while (usually) leaving as small a footprint as possible. I believe through observation that the proper path is one that is conducive to there being a harmony, avoiding the divided houses where possible. Cancer is a good example of a house divided, and this same principle works in our other interactions with all of the life around us.

1. isn't "self-sacrifice" (abandoning "happiness") simply trading "nobility" or "honor" or "duty" or "goodness" or "righteousness" or "meaningfulness" for a more naive goal or "happiness"?

No, although I understand most would be driven by those motives. Before I say anymore on this, I must qualify that like everyone else, I have very petty, self centered programs that run inside of me. That at times I do succumb to these programs despite seeing at times what is what. But having said that, it doesn't invalidate what I describe or the experiences I've had with these ways.

The things you describe are all positions of intellect that are derived from a merchants spirit. It is possible, and many times my own choices are proof of this, that one can operate in a way that is detached and no longer subservient to a merchant spirit.

To go back to qualifying my statements, none of this is to imply that I do not enjoy happiness and when allowed (or I've been selfish) do appreciate its company. But there is so much magic when one drops the pursuit of it. If we chain ourselves to intellect, we also chain ourselves to the desires and passions of a merchant.