You're right at that. I think Fødselsdag is most used in formal situations because it's more understandeble.
And bursdag was originaly gebursdag, this is an older word, more used by the elder in Norway and in dialects. Also, I've seen people use gebursdag instead of bursdag in more formal settings.
But i guess Fødselsdag also is more used because it sounds better and cleaner, and is more corect "bokmål".