I appreciate the quick and thoughtful replies. I am really trying here but every time I dig into this I just lose a hold on these concepts.
Let me take a big step back and ask a question related to how I'm trying to understand this schematic, aside from the pull-up resistor specifically. This one should really highlight where I'm coming from.
If sensor pin 2 is input/output as the spec sheet explains, does this mean that pin 2 both sources and sinks power at different times depending on what it's doing? Or does power always flow through pin 2 in the same direction (and if so, how does data go the opposite way?). Related: does arduino pin 3 supply power to pin 2, sink power from pin 2, or both at different times?
If that question makes you think I have baked beans for brains, I can assure that when it comes to electricity and electrical engineering, I do. But I'm really trying here.
Andy