You're right.
The first, with the past simple, is just a finished past action. You could continue that with something like...."I sat here yesterday with my friends, and then we walked into the centre".
This indicates that the first action finished before the second one started.
The second, with the past continuous, can be used alone. It's OK to say "I was sitting here yesterday with my friends", and nothing more.
If you want to continue that, you could say something like..."I was sitting here yesterday with my friends when an egg hit me in the face"
This indicates that the first action was still in progress when the second one happened.
You can also use 'while', which indicates doing two things at the same time..."I was sitting here yesterday with my friends while eating an egg".
Hope that helps! :)