In general, you do want your patchbay to be TRS, which will let you patch balanced signals through. The inserts are an odd case, since they are really two single-ended signals on a single plug. So for your inserts, you'll be doing essentially a balanced-to-single-ended conversion at the patchbay. This does work, and we'll get into it below.
First of all: yes, the inserts are an _insert_, so the signal coming back in will be completely effected: 100% wet. The only way to mix dry and wet is to either use an external effect that has internal means to mix dry and wet (like most reverbs, for example), or use two channels so that you can get some of your dry signal back into the mix. Typically, though, with a compressor you will want to use the wet signal only: adding the uncompressed signal back to the compressed version doesn't make a lot of sense, and you may run into phase inversion problems and other unpleasantnesses. Anyway, an insert _breaks the channel path_, so what comes out of the external effect is all that gets back to the channel.
Routing to the bay: you'll use your Y cable, and you'll want to set it up so that the send goes into the top jack of a pair, and the return goes into the bottom jack of a pair, on the back side of the bay. And you'll want to set up that pair of jacks so that they are "half-normalled". This means that when nothing is connected on the front of the bay, the top jack is connected to the bottom jack, establishing a default connection. You need this, or you'll have no connectivity in your channel when there is no effect patched up: the signal will go to the bay and die there.
Half-normal connections work like this: if you plug a patch cable into the upper (send) jack on the front, the normal connection back to the return is left in place: this allows you to take your send and do something else with it, while still having the channel work as if there's no patch in place. This technique can be very useful: half-normalling gives you a freebie 2-way mult.
But if you connect a patch cable to the bottom (return) jack, switch contacts inside the jack are opened, and the normal connection is broken. The only way signal gets back to your channel _now_ is if you connect that return jack to the output of an effect with the other end of your patch cable.
You want half-normal much more ofthen that full-normal. Full normal wil break the default connection whether you connect to the botton or the top jack- so you lose the ability to do the freebie mult.
To learn more about normalling, search on username "skippy" and keyword "half-normal". We've beat it to death around here several times.
And lastly, TRS versus TS. Your inserts are single-ended: TS. However, you can patch balanced TRS inputs and outputs to these TS signals and have it work just fine. Think about it this way: when you patch a balanced TRS input to your insert send, tip gets hooked to tip, and sleeve gets hooked to sleeve. The other half of the balanced signal, ring, gets shorted to sleeve- since your TS connection doesn't have a ring. This works just fine, since the balanced input will see hot and ground, rather than hot and cold. And on the return side, your balanced output will have one side shorted to ground. This is also usually fine, because 99-44/100s of all current gear has outputs that don't care one bit.
You want a TRS bay so that you can use true balanced signal connections whereever pssible. This is just one place where it isn't possible...
