Firstly wouldn't this be an issue for BTC to ever be mainstream if you can't pay for things immediately in shops etc?
When will people ever learn before asking stupid questions... YOU CAN pay for things immediately in shops etc. Nobody EVER makes you wait for a confirmation when paying in a store.
Also I presume the confirmation time will take longer the bigger the difficulty?
The entire point of the difficulty is actually to keep the confirmation time at 10 minutes.
I think i've understood how it works correctly?
Nope.