Yes, that it is true. It also says so pretty clearly in the UI "Followers; only your followers".
I don't think think that the red reply happens very often. Mastodon doesn't show everything that arrives in the ActivityPub inbox in the home timeline. So there is a good chance that E would not see B's post, and not reply.h
The worse problem here is that if D does not follow B, they will not see B's post and possibly write the same thing.