That's correct and vice versa. Note that it applies to the ticket, rather than the journey.
That's not what the Railcard conditions say:
4.2 Discounts are not available on tickets for travel on morning peak services for journeys that start and end within the London & South East area (defined by the Network Railcard area – network-railcard.co.uk/map) on Monday to Friday (except on public holidays).
The restriction there applies if your tickets are for a journey that's within the restricted period. So a technical interpretation would say that if you bought a London to Peterborough ticket, but used it to make a journey to Huntingdon, the restriction would still apply notwithstanding the fact that Peterborough is outside the Network Area.
The corollary of that is that split tickets would not have any time restriction, even if almost all of your tickets are for sections of route that are solely within the Network Area.
Incidentally, the restriction is unbelievably wooly and undefined in terms of what "morning peak services" means; they purport to give themselves complete leeway to define that term, which is likely to constitute an unfair term under Part 2 of the Consumer Rights Act 2015
It would be impossible to impose such a restriction, as the journey cannot be defined.
Of course it can! A member of staff would simply ask where you are coming from and where you are going. Most people would not be switched-on enough to say somewhere outside the Network Area if their destination were actually within it.
That being said, I imagine it's unlikely any member of staff has read the Railcard conditions and so they are unlikely to be aware that the restriction is technically on journeys rather than tickets, as discussed above. They are likely to apply it on a ticket basis, regardless of what the wording actually says.