I'm VERY new to Sitecore so forgive me, if this question doesn't make any sense.

I've added an insert option to the __StandardValues of a template. I expect the content using this template to have the this new insert option but it doesn't.

Is there another step to this?

or do changes to templates not affect those content that have already been created using the template...

This is a normal behavior.

You need to reset the insert options of the item to see the changes on standard values,if you create items based on a template and then you add to the standardvalues of template new insert options.

Please have a look on below picture. You need to press Reset button from Insert Options section.

If you create new items based on the template you will see the changes from Standard Value.

If you want to reset InsertOptions of an item you can do it programatically using:

1. 
   

   C# Code:

   
   
   

   item.Fields["__Masters"].Reset();

   
   


2. 
   

   Using Powershell Extension :

   
   
   

   Example: Get-Item "master:/sitecore/content/home" | Reset-ItemField -IncludeStandardFields -Name "__Masters"

   
   

Reset Insert Options field to standard values

If the Insert options field of the item was previously edited, it will have its own value instead of taking its value from the __Standard Values item for that template. (This is true even if you updated the item's value back to what was stored in the __Standard Values item).

To remove the item-specific value and fall back to the standard value, you can use the Reset button:

1. In the Content Editor, under the View ribbon tab, check the Standard fields checkbox to show standard fields, of which the Insert options field (technically called __Masters) is one.


2. 
   

   In the Versions ribbon tab, click the Reset button:

   
   
   

   

   
   



3. Check the box next to the Insert options field and click the Reset button.