What the potential supervisor really wants to know is whether he/she is your first choice. By "first choice", I mean "if we made you a fully funded offer but you also received other fully funded offers, would you accept our offer?". If the answer is yes, then he/she may be significantly more willing to help you write a strong application (not just for the position itself, but also for funding). Having said that, a reasonable supervisor would understand that people may change their mind as more information becomes available or if another place makes a significantly better offer in terms of funding.
Your answer ("Yes, but that's because I don't how admissions work.") is not ideal, but a reasonable supervisor should be understanding of the fact that many applicants do not really know the system very well.
"I will work with you to write the best competitive statement of purpose"
That is not an offer of a place, but it is a good sign. It means what it says. The prospective supervisor is offering to review your application to his/her institution and give detailed advice on your statement of purpose. This may be very useful, and implies strongly that the prospective supervisor thinks you are a serious candidate. But he/she may be keeping his/her options open in case a stronger candidate applies. Or it may be that decisions on admission are not his/her sole prerogative (the exact process depends on the country and institution).