Yes, you are hearing correctly.
You are right that the 'd' isn't pronounced in 'used to'. It is virtually impossible to pronounce a 'd' followed by a 't' in natural speech. The two sounds merge together, and only the 't' is said.
You are also right that 'to' has two pronunciations: /tu:/ when it is stressed, and /tə/ when it is unstressed. In fact, the preposition 'to' is very rarely stressed. In the phrase 'used to xxx' it is unstressed, so the pronunciation is /tə/.
The two words 'used to', spoken in connected speech, sound like /ju:stə/ .
If the word 'Youstah' existed, it would be pronounced the same.