You are correct, the extra digits just further subdivide the square. In WW II mapping, it's not uncommon to see three levels of subdivision, so similar for WW I would be expected.
Note that the last pair of numbers (whether single digit or two digit or more) technically define the bottom left corner of a square, not a point. Thus the object/place they are assigning coordinates to are somewhere inside that square. More digits just define a smaller square. Practically, if you ever found 3 digit numbers, that would be a small enough square to be treated like a point.
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