OkI agree. At least 3 corners of the largest square must touch the sides of the pentagon or else a larger square can be fit by rotation/translation then dilatation. This leaves the square with all corners on pentagon's sides or the square you suggested, of which your one is the largest.
You've got it.This is the square: View attachment 22575
As each angle of a regular pentagon is 108 degrees and for a square it is 90 degrees we can determine all angles in the figure. Hence the ratios between all line segments can also be determined. Given the side length of the pentagon is 1, the lengths of all other line segments is determined from these ratios.
I found: square length=sin 108/(sin 18+sin36)=1.0604… which is less than the length you have given.
I wasn't sure whether you knew what you said.What do you mean by largest and smallest?