If it's not really a 'houseboat' am I even required to have a potty on it?
Any vessel with sleeping and cooking facilities is required to have some type of toilet facilities
If not I assume anything I put in is 'legal'
Not quite. On inland waters it must be designed to receive and retain, but not discharge human body waste. That can be a self contained system or a toilet and separate holding tank.
If I'm an appropriate distance from shore and I can dump the tank overboard how would that work?
The legal "appropriate distance from shore" to dump a tank is in open ocean at least 3 miles from nearest point on the entire US coastline...however, that doesn't stop a lot of people from doing it illegally.
Yes, you'd need a pump to empty the tank if there's no available pumpout facilities. A full 5 gal tank weighs about 50 lbs including the weight of the tank, so I don't recommend trying to carry it off the boat or even lifting it to dump it over the side unless you're a weight lifter. Uncle Matt said in his post above that he's installed one...he should be a good source for installation guidance.
You asked about the Dometic 711-M28...one of my favorite self-contained systems. It uses onboard pressurized fresh water and has a china bowl atop a 9.5 gallon tank--which, btw, has about a 20" x 20" footprint--that really is permanently mounted to the sole, so there is no option to carry the tank off the boat....pumpout or a pump and hose long enough to reach your septic tank access are the only options. About $600 at DefenderDometic 711-M28 Traveler at Defender