Since it's a cardigan, you only increase on one edge for the front, not both since it's 'half' of the back. The 'as set by back' part seems to refer to increasing 2 sts in from the edge, not that you do them at both ends of the row - the instructions for the front say to inc every other row at the end of the row.
So row 3 would be "K to last 2 sts, M1, K2" and you're only increasing 1 st. The part at the end "increase 1 st" after the knit 2 tells you how many sts are increased, not that you inc in the end. I don't know where you got that from anyway, I don't see it on the pattern anywhere.
sue- knitting heretic