Well what you want to do while the bike is on the center stand, is spin the rear wheel so check to make sure that the chain is riding on the center of the rear sproket, and not mis-aligned and rubbing on one side of the sprocket.
What you are essentially and want to do is line up the rear sprocket so that it points at and lines up perfectly with the front sprocket.
In essence, you are correct, you want the rear axle to be perpendictual to the center line of the bike, but more importantly parallel to the output shaft.
Because you are rubbing on the inside of the rear sprocket, looking from the top of the bike down, your rear wheel is slightly pointed to the right. You will need to readjust the rear axle to turn it a little more to the left. When the rear wheel is facing forward the chain will ride nicely on the rear sprocket with out really wearing on either side. If for say your rear sprocket is wearing or riding more on the outside of the sprocket, then your rear wheel (again looking from above down) is too much to the left and you need to pull it to the right.
I have read that the marks on the rear swing arm are off, but I have not adjusted my chain yet and do not know this to be true.
Here is the page that I was trying to find earlier:
More precisely here is a home made tool that can be used to check the distance between your swing arm bolts and your axle bolts to true the rear wheel:
What this is saying essentially, if the distance between your swing arm bolt, and rear axle bolt are the same on both sides, then your rear wheel is straight.