That is close to my interpretation. Grant' arrest of McClernand is technically correct, and he has a valid charge. However, he has used the option of suspending the preferment of charges. Lincoln's backdated order makes the relief a regular one by the President, which means the charges are no longer needed. Thus the formal charges are dropped.
Had it gone to a court-martial or a court-of-inquiry then McClernand would likely have been found guilty. However, it might have been mutual destruction as it would drag Grant into the court as well and expose Grant's own conduct. This would certainly have killed Grant's Presidential ambitions, and may have resulted in him being expelled the service as well.
You should stop here. Grant DID NOT arrest McClernand. If you think he did, please post the arrest order. If you cannot, please stop posting this empty claim.