Gloss varnish, by definition, is going to settle to a smooth layer. So it shouldn't matter significantly whether you brush it or spray it. For such a small area, brushing is presumably easier. That's what I do, at least.
Also am I allowing the gloss to dry before applying decal or applying to the wet paint directly.
You're letting the gloss varnish dry first. The point is to provide a smooth surface for the decal to adhere to, not to glue the decal on with varnish.
Once applied and dried will then applying a Matt varnish make it not glossy anymore?
Yes, matt varnish on top will remove the gloss.
I'm still not perfect with decals, but I'm pretty happy with my process, which I gathered from various sites...
1) Gloss varnish area, let dry overnight
2) Cut out decal. As noted, try to trim off as much clear material from the edges as you possibly can.
3) Soak the decal in water.
4) While it's soaking, liberally brush the area with decal *setting* solution. (Micro-Set or similar)
5) Slide the decal off and try to dab off excess water as best as you can, or let it rest on a paper towel briefly.
6) Put the decal in place. If it gets too hard to slide, add more decal setting solution. Try to get the decal as flat to the surface as possible, but it's doesn't have to be perfect as long as the overall position is correct.
7) Let dry *overnight*.
8) Liberally apply decal *solvent* solution (Micro-Sol or similar) while brushing down the edges of the decal. This should get the decal thoroughly flush with the surface and remove any bubbles.
I haven't felt the need to gloss over the decal at the end since I'm applying a matte varnish as a final step anyway, but it probably wouldn't hurt. Sometimes I'll still get a minute air pocket at the edge. You can scrape those off very, *very* carefully with a hobby knife after everything is dry.