To use an "app specific password" I assume I will use it to update , or set up, that app, (AND web entry password too?) for say a bank, phone company, mail service, etc.

You don't use an app-specific password when accessing your Apple ID or other Apple services via a website and you don't use them when using a 3rd party app to access a non-Apple service (e.g., a banking app). You only use them when setting up a 3rd party app that accesses iCloud (e.g., a 3rd party mail app to access your iCloud email or calendar). More information in: Using app-specific passwords - Apple Support