Welcome to the forum.
You do need the gauge set to diagnose AC system.
Good read here for that: Troubleshooting with Gauges FAQ
AC pressure varies with outside temp, by alot, so keep that in mind.
When adding refrigerant make sure it has color added, usually green, this can help you find possible leaks.
AC is not complicated, image here: http://georgemullerauto.com/wp-conte...ing-system.jpg
Compressor takes low pressure refrigerant and makes it high pressure, which makes it very hot, the Expansion valve changes it back to low pressure which causes it to cool very rapidly, then the now low pressure refrigerant goes back to compressor to be changed to high pressure.
Home AC, refrigerators and freezers all work the same way.
MAX AC just means the Fresh Air vent is closed and Cab air is being recirculated, so it has nothing to do with the actual AC system itself, it is a vent setting.
AC compressor usually only cycles on when AC or Defrost is selected, but it really depends on the Climate Control system, '97 is around the time when Ford started involving the Computer in AC control, so can't say if it is normal for Compressor to kick on in other settings.
As you said it is used to Dry the air in the cab, so could be used anytime for that.