Incr. V/s. Diff.

Would that mean - Incremental will allways backup comparing to the last full backup irrespective of any incremental backups in between.

Differential will allways backup comparing to the last lower level backup i.e. in the thread you refered to level 5 is allways comparing to last full (Level 0). if there was any other level set any day between 1 & 4, then it woudl have backed up comparing to that level.

If I set a Full backup for Sunday and incremental for each weekday, how would it backup on Wednesday.

Similarly, if I set Full on Sunday & differentail on week days starting level 1,2... for Monday, Tuesday... respectively, how would it backup on Wednesday?

Incremental won't go back against last full (unless is first incremental after previous level full), but rather other incremental levels. As for diffs what you said is correct.

No it means since the 'last' backup, so anything that has changed since the last incremental or full backup....

Think of it in the following terms...

If my backup schedule was Full Friday, increm sat-thurs,
a full Restore on the Monday would require the Full Backup, then the Increm backup from Saturday and Sunday...

If my backup schedule was Full Friday, differentials from sat-thurs....
a full restore on monday would be the Full backup tapes, and the last Different backup which was sundays...

the differentials get larger with each day to include those days from the last Full.

Incremental (changes since incremental done on Tuesday).

Would this mean none of the two types compare with the last full backup i.e. if I want ot backup changes between Sunday & Thursday on Thursday - it is not possible?

It is possible with level backup (as full backup is seen as level 0 - actually that is the main reason why level backups are used by customers). You will find nice graph describing this example in admin guide.