Well, you all are on the right tract.
The "DP" (Designated Player) is listed in the batting order among the 9 batters. She is listed anywhere in the batting order instead of any one specific deffensive player. Unlike the "DH" (designated hitter), she does not have to be batting for the picher, she may be batting for any one of the nine deffenders.
The player she is batting for is labeled as the "Flex" player, and plays defense only.
If the "Flex" player is ever allowed to take a turn at bat during a game, she must take the batting order that was occupied by the "DP" and at that time, it does away with the coach's option to use a "DP".
I know this can be confusing, but as a high school fast pitch umpire for the past five years, I have seen good coaches use this rule to their advatage and I have seen some coach's who don't yet understand what the purpose of the rule is all about.