Thanks for that... that really does help clear things up significantly and place the original quote in a much better context.
Now, if the student was sincere in putting the Ajaan's instructions into practice and was persistent in practicing the repetition, if his mind then became calm and bright from entering into concentration, he would come and ask Ajaan Sao: "When meditating on 'Buddho' my state of mind becomes such-and-such. What should I do now?" If it was right, Ajaan Sao would say, "Keep on meditating." If not, he would say, "You have to do such-and-such. What you're doing isn't right."
As soon as Ajaan Sao heard this, he said, "This isn't right. For the mind to go knowing and seeing outside isn't right. You have to make it know inside."
The monk then asked, "How should I go about making it know inside?"
Phra Ajaan Sao answered, "When the mind is in a bright state like that, when it has forgotten or abandoned its repetition and is simply sitting empty and still, look for the breath. If the sensation of the breath appears in your awareness, focus on the breath as your object and then simply keep track of it, following it inward until the mind becomes even calmer and brighter."
And so the monk followed the Ajaan's instructions until finally the mind settled down in threshold concentration (upacara samadhi), following which the breath became more and more refined, ultimately to the point where it disappeared. His sensation of having a body also disappeared, leaving just the state in which the mind was sitting absolutely still, a state of awareness itself standing out clear, with no sense of going forward or back, no sense of where the mind was, because at that moment there was just the mind, all on its own. At this point, the monk came again to ask, "After my mind has become calm and bright, and I fix my attention on the breath and follow the breath inward until it reaches a state of being absolutely quiet and still — so still that nothing is left, the breath doesn't appear, the sense of having a body vanishes, only the mind stands out, brilliant and still: When it's like this, is it right or wrong?"
"Whether it's right or wrong," the Ajaan answered, "take that as your standard. Make an effort to be able to do this as often as possible, and only when you're skilled at it should you come and see me again."
After he had left this level of concentration and came to see Ajaan Sao, he was told, "This level of concentration is fixed penetration (appana samadhi). You can rest assured that in this level of concentration there is no insight or knowledge of anything at all. There's only the brightness and the stillness. If the mind is forever in that state, it will be stuck simply on that level of stillness. So once you've made the mind still like this, watch for the interval where it begins to stir out of its concentration. As soon as the mind has a sense that it's beginning to take up an object — no matter what object may appear first — focus on the act of taking up an object. That's what you should examine."
The monk followed the Ajaan's instructions and afterwards he was able to make fair progress in the level of his mind.