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If I decode geohash sj8101b0858n85202hbh0j I get rectangle defined by min latitude, min longitude, max latitude, max longitude.

My understanding is that if I decode first part of any hash (e.g. sj8101 in above example), I'll always get larger rectangle than what I had got with full hash. In other words, all the rectangles got by any hash (e.g. sj8101???????) will always be inside of the large rectangle that we get by shorter length hash (e.g. sj8101). Please can someone verify if my understanding is correct.

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You are correct. A geohash rectangle of precision N characters will always be fully contained by the corresponding geohash of size N - 1 containing all the same preceding characters.

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