I shot a similar system (E-pl2) and now shoot the OM-D. "Fill" is the right setting for the on-camera flash. It is the setting that fires the flash every time and so is the only setting that you can use underwater with strobes. If you choose "auto" for the flash and if there is enough light (ie shallow dives, clear water) the camera might "think" no flash is needed and not fire the strobe. Also, in "fill" mode the camera will perform TTL metering for the flash and so give you the correct flash exposure. Of course, you need to have the YS-D1 also set to "TTL" mode for auto flash exposure.
Your comment that the photos "look fairly accurate" indicates that the system is working correctly. By the way, you cannot, typically, visually "see" any adjustment of the flash that the camera is doing. Strobes always fire on "high" intensity, and the exposure is adjusted by altering, in miliseconds, the duration of the flash (not the intensity). Thus, most flashes "look" similar to the naked eye unless they are extremely short. Similarly, the strobe might well be mimicing the pre-flash but at such an extremely short duration (the pre-flash is a very, very, very short duration flash) that you are not noticing.
The proof is in the exposure. If the areas exposed by flash look generally accurate under a variety of different conditions, then the TTL is working. If you still have doubts, walk around the house and test it in a variety of low-light conditions including at night to see how the flash lights up the room. When you do this test, set the camera to "fill" flash, and the strobe to TTL. This gives you full auto flash exposure. Then, set the camera exposure mode to "manual", set an aperture of f8 and a shutter of 1/160. Thus, the exposure will be solely controled by the camera/strobe TTL system as opposed to the camera altering exposure by changing the shutter or apertyre. If the flash exposures look good you will know for sure that it is working.
OF course even TTL flash is not perfect all the time and sometimes you need to adjust. In TTL mode you can adjust the flash exposure up or down on-camera by using the flash compensation setting in the menu or master control panel. That will make the area exposed by the flash lighter or darker as you choose. When shooting wide-angle, for example, I sometimes dial down the flash compensation by 1 stop if there is a lot of blue in the background, as the auto exposure will tend to overexpose the areas lit by flash because it is also trying to "light" the background. Only time and experience with your gear will tell you when this is needed. Good thing about digital is you can see your result and make the adjustment right away.
Or, on the YS-D1 itself, there are dials on the flash itself that will increase or decrease exposure. So, you have two options for adjusting flash intensity. Very versatile.