> Do I reply to the person or the list?
Up to you! If you want to reply to the person only, then you hit "Reply". If you want to reply to the list (so that everyone on the list can see it), you hit "Reply List", if your e-mail client has such a button. If your e-mail client does not, then there is no magic either: Reply to the person in your TO, so that they get the message immediately, and put the list address in CC. No magic.
> How do I make sure my reply is properly threaded and doesn't show up as a new thread in the list or something?
That is a better question already. I asked myself this before and also asked other people running a mailing list or at least being very active there. There is some kind of message matching algorithm, which looks at the "subject" of your e-mail. It is very reliable to simply put a "Re: " in front of the subject of the message you want to reply to. This is usually done by e-mail clients automatically, if you are using "Reply" buttons and the context is clear for the e-mail client. If the context is not clear to the e-mail client or cannot be clear from my actions in the UI of it, then I copy the title and type "Re: " myself. Never failed me so far.
It is really not that complicated and no magic is involved at the usage side of things. Use a proper e-mail client, not some limitted web interface, and you should not have much problems. Gmail does not play into the question of whether it is simple to use mailing lists. It is merely one e-mail service provider of many, and not a specifically good one at that. Lets not make this about gmail. I am using mailing lists almost every day in my e-mail client (Thunderbird). No editing of e-mail headers or anything. Don't over-complicate or overthink things and you will be fine. No one demands of you to edit e-mail headers in plain text.