Adding content block to the Home Page, removing 'std' <div>

Let us divide your problem into 3 sections and review it.

1. You need to add a template file to your CMS Page

The method you adopt here will work for sure. That is you need to add this code snippet inside your cms page , under design tab

<reference name="content"><block type="core/template" name="home-content"  template="test.phtml" /></reference>

Since your template file directly come under content block, your template content will be rendered by magento. So you dont need to use as property in your core/template block.

2. How to avoid <div class="std"></div>

This div is actually a wrapper div element for cms pages. See the definition of this block here.

  <block type="page/html_wrapper" name="cms.wrapper" translate="label">
        <label>CMS Content Wrapper</label>
        <action method="setElementClass"><value>std</value></action>
        <block type="cms/page" name="cms_page"/>
  </block>

As you can see, cms.wrapper block is of type page/html_wrapper. What this block does is, it will wrap all of its child block with a div element (default element) and render the child blocks automatically.

In order to avoid this block, you have used this code

<remove name="cms.wrapper">

However it is completely wrong. It does remove the wrapper div indeed. But along with that it also removes it child block cms_page. This cms_page is with a type cms/page. That means it reference to the block Mage_Cms_Block_Page. This block is the "heart" of CMS Pages. So removing the wrapper wiped out the heart block of CMS Page also. That is why you didn't get any output in your cms page.

So what you should do to avoid this wrapper? The answer is pretty simple. Escape cms_page from the wrapper and then remove the wrapper safely. So here is the code that you need to use on your cms page layout section.

<reference name="content"><remove name="cms.wrapper" /><block type="core/template" name="home-content"  template="test.phtml" /><block type="cms/page" name="cms_page"/></reference>

As you can see in the layout xml code, we first remove the wrapper and hence inserted cms_page block through our code. We also used our template block as you can see. This will render the content of template file first in your page, then followed by cms page content.

3. How admin -> CMS -> layout update XML differs from the functionality of layout.xml

Suppose you would like to have a special appearance for one of CMS Page that you have in your site. For that, the best method that you can opt is, add layout update through admin->CMS->Layout. This will be uniquely apply for CMS page only.

But if you need to apply some general changes to all CMS Pages, then it would be easy to go with layout.xml.

So generally, what method should adopt to change the layout purely depend upon what you want to achieve. Depending upon that, you need to go with one method. Not all method.

Hope that helps

If there's only one offending page, then the best and easiest way IMO:

Edit the CMS page's "Design" tab.

Reference the wrapper element, use the setElementClass method to apply either no class or a new class.

<reference name="cms.wrapper">
<action method="setElementClass"><value>none</value></action>
</reference>