Step 3, if you move your mouse sideways to change your view by 10 degrees for example... I'm assuming that the rendering device can re-draw the scene without any help from the game engine because it already has the geometry and textures in the memory buffer. The resulting view on the scren has changed of course, and is what -I- call a new 'frame'.
Wrong. To put it simply, the video card knows about and draws exactly what you're looking at--actually, exactly what the game tells the card you're looking at--no more, no less. As a simple example that can disprove everything you said, let's compare 2 3D games.
1) A first-person shooter. You move the mouse left, your view turns left because your player turns left.
2) A flight simulator. You move the mouse left, your view moves left, tilts counterclockwise, and starts to drop below the horizon.
How on earth would the video card know what you wanted to happen when you move the mouse? It doesn't know that it's rendering a first-person shooter--all it knows is that it's drawing a set of points on the screen (and doing other stuff to them).
So... when you move the mouse, the mouse tells the operating system that the mouse moved, the operating system tells the game that the mouse moved, and then game recomputes what should be drawn and then tells the video card to draw it.
What you said is completely made up, although I did enjoy how you presented it as fact. I love the internet.