I think I have been confusing DUST Warfare close-combat (CC) with DUST Tactics CC… When a unit closes within 3 inches of an enemy unit and then does an attack action, I have been allowing the attacked-unit to fight back in CC, with CC weapons. I let them fight back automatically without using a reaction, and I let all the models in the unit fight, regardless of whether they were within 3 inches of an enemy model.

I think the correct way to do CC is that the attacked unit only gets to fight back if they use a Reaction, and then only the models within 3 inches get to fight.

Also, even in CC, I have been letting the attacker move closer than 1 inch to enemy models. (That is something I guess I am confusing with the rules from WH40k). I think the correct way is to never let models be closer than 1 inch to enemy models.

Have I been doing it wrong and is my new perception correct?

Your new interpretation is correct… enemies do not automatically get to attack back, they need to react to you if they want to fight you. And you never get within an inch of them.

Thanks for the confirmation! I'll get this game right yet!