You are correct. I followed up with a response that is still waiting on the moderator. That response also has a follow-up question asking about how to not have to restart the server. The answer is to do the --with-library argument correctly.
For posterity and future googlers:
calibredb add daily-reading/daily-reading.epub --with-library
http://50.92.227.145:8080/#calibre-library --username XYZ--password ABC --automerge overwrite
Thanks for your help. This really is an awesome piece of software.