And all of this works how in SH3?

In the game the ship gets assigned the tonnage you will be awarded for sinking it. For warships it's the displacement. For everything else it's the GRT. The GRT numbers are the average for the type of ship. In real life individual ships had different GRTs. The game can't do this because it would mean each individual ship had to be listed, and the space to hold the files would be enormous.

I have about 1.3 million GRT (minus about 300k warship displacement, I think) so far. Holy cow, that's going to be a lot of ship weight.

And remember, if merchants were awarded based upon total ship weight, different things will change the award. Cotton does not weigh the same as a load of M4 Shermans.

It doesn't matter. As I explained earlier, the GRT and the award are based on a number arrived at between the insurer and the owner. What cargo is carried is irrelevant - the GRT never changes.