Is the journal supposed to be write-only? From the description it sounds so, but I am wondering whether part of the process is supposed to involve reviewing your old entries.

Neutral valence, high arousal could be "surprise". If sustained, it's the proverbial "state of cat-like readiness".

I recommend using Google Images ("arousal valence space") to find some pictures, which I think would help your intuition along.

"Dimensions" because n real values describe an n-dimensional space.

Semantic labels are a way to describe emotions but would not normally be used in conjunction with dimensional descriptions. Typically you would see a 2D arousal-valence emotional space or a 3D arousal-valence-dominance space. (Dominance is a relatively recent addition needed to distinguish some emotions that occupy the same region of arousal and valence: one such pair is anger and fear, both high-arousal low-valence.)