My understanding is that this will mean I can spend 90 days in Schengen then enter Italy to activate this 90 day visa, would this be correct?
Time spent in Italy with an Italian D visa does not count against the 90 days, period. It's not required under the Schengen codes to leave and reenter in order to "switch" between the D visa and short-stay 90/180 status. The visa becomes active on its validity date. Some countries maintain that you should, however, so to avoid doubt you might want to do that.
But you might want to apply for longer than 90 days in Italy, otherwise they might refuse because you don't need a visa to stay in Italy for 90 days. I recall reading about a student who had that problem, wanting to travel around Europe after a 90-day program. If you get 120 days, or even 91, there's nothing saying you have to use them all.
If yes, do those 90 days spent in Italy count as time not spent in Schengen therefore allowing me to go back to Spain, France etc or do I need to be out 90 days after my visa expires?
After spending 90 days in Italy with a D visa, you will immediately have 90 days available to spend in the Schengen area.
What if I do 60 days in Schengen, 30 days out, enter Italy and spend 90 days there, do I still have 30 days left to spend in Schengen?
No, in that case you'll have 90 days available, even if the sixty days immediately precede your 90 days in Italy, because those days will be more than 180 days in the past before your day count reaches 90.