Yes, that's the correct PGP key. The signature is valid and the file therefore is the original electrum file.
The reason it shows '.. is not trusted by you or ..' is because you didn't explicitly
trust this key.
the Electrum app asked me if I wanted to encrypt my wallet but I chose not to
wrong move
you must choose yes
He MUST ? Not really, no.
You don't need to encrypt your wallet file if you are using electrum as a front-end for your hardware wallet.
One obviously should encrypt the wallet file if it stores sensitive information (i.e. private keys / seed), but without sensitive information being stored (which is the case when using electrum with a hardware wallet) that's definitely not necessary.
The wallet is password protected and since no transaction can be sent without physical confirmation on the Ledger itself I figured there is no need to encrypt the wallet. Is my thinking correct?
Yes, your thinking is correct.