"k to 12 sts before marker, w&t
p to 12 sts before marker, w&t"
you then do the same, but to 16 and then 20 sts before the marker.
Yes, that is standard for short rows. Your marker is at the underarm. What you are going to do it knit like you were going to knit all the way around the armhole, but you stop short 12 stitches before you get to that underarm marker, you wrap a stitch then turn the work so that you are on the purl side and do the next row. On this one you purl around but stop 12 stitches before the underarm marker, wrap and turn again.
Then you knit until you have 16 stitches to go to the marker and wrap and turn again, and purl until 16 before the marker, wrap a stitch and turn again.
Now you knit till 20 before the marker, wrap and turn. Purl to 20 before the marker, wrap and turn.
Now you have the right side facing you and this time you are going to actually work all the way around and each time you come to one of the stitches that has been wrapped you pick up the wrap so that it doesn't show on the front. Then you work in moss stitch for however many rounds it says.
How to set it up to work on ML I'm not real sure about, I gave my best guess already. But what is happening in this section is that you are knitting back and forth, flat, but you need some method to get you around the sharp curve of the sleeve and the designer chose dpns.
I know you can do short rows when working in the round, but during the short row part you are working flat, not really in the round for that part, then you can continue to work in the round. What I don't know is how to do it with the ML method. I can do it with dpns or on a circular that is the right length for the job, but ML...