Nice walk-through, @Daghan! It would be really nice if you could add this to the wiki page about Docker-based deployment. Just fork the wiki and submit a pull request with your changes 
Environment variables in the docker-compose.yml have precedence over the .ttn.yaml file. Also, ttn looks for the .ttnctl.yaml file inside the container, and you probably edited the file on your own machine.
The simulator is old, don't use it. I usually test with the ttnctl uplink command.