The server would never see a plain text version of your password.
As you realized in your edit already, this part is not correct. The server would always receive your password plaintext (when signing up and when logging in), but only store it hashed and salted.
As you realized in your edit already, this part is not correct. The server would always receive your password plaintext (when signing up and when logging in), but only store it hashed and salted.