Ok, I think I understand all except how did you fill in bits 4 and 5? Why a 0 and 1 in the location you put them in?

The lsb's of the duty cycle go in there. Its a 10 bit duty cycle. The top 8 are shifted away leaving to 2 lsb's. In decimal the duty cycle is 20. Is the binary representaion of 20 used? Is that how you get the last 2 bits?
20 = 00010100 so the lsb's should be 00, no?