Ok, here is what I think your vet is telling you. If you get a reading under 100 at any time during the cycle, then do not give any insulin until you see a number in the range of 200-220. If Skittles is not at least up to 200 when his next shot is scheduled (+12), then don't give a shot until he is.
Actually, I think this is not much different than what we normally tell caregivers when they first start out. "Don't shoot less than 200".
So maybe not bad advice. Just a confusing way to give it to you.
On the ketone test. It might be that you waited a few seconds longer than the directions say to check the strip? I don't remember how they are written, but I think the strip will get darker after whatever the " time limit" is. Check again tomorrow and see what it looks like. If you were to see "trace" you should inform the vet asap. If he ever does show ketones, the earlier it is dealt with, the better. They would probably verify it by testing his blood, and they'd want to make sure he doesn't have some sort of infection going on.