Great question. It's intriguing to see all the different approaches. As you can see from the variety, ultimately you'll find your own path. For what they're worth, here are my two cents.
I had often heard that rewriting is where the real writing begins, and I used to--well-- rather poo-poo that idea. "I edit while I write," I told myself. And I always believed that. I believed it right up until I was faced with the first serious rewrite of my first novel. As you mentioned the rewriting process can be extremely overwhelming and confusing and at the outset it really was for me. I'd get trapped in my head, going over and over the same ground, doing a whole lot of circular thinking about what was going to work. Anyway, while I am certain everyone has their own techniques for Navigating the Rewrite, this is the methodology that broke the cycle for me in the end:
I sat down one morning and wrote two paragraphs on the two main themes of my novel. I then tacked them up on the bulletin board beside my desk. Every morning I read them before I would look at the novel. Keeping those themes firmly in my head as I began to work, every story element, character, plot point that didn't feed the movement and progression of those themes toward their climax-- was cut.
I was shocked at how much chaff I could cut from the wheat. I ended up cutting more than I would have thought possible. Words led to paragraphs and ultimately even a character and a few chapters I adored were discarded. In cases where I was too broken up about losing something, I'd store away the material I'd cut, in case it would someday prove useful in another tale. When I was finished I had cut nearly 100 pages from the original manuscript. After two more rewrites, I had cut a total of 125 pages from what proved to be the final draft.
It was hard work, and it was slow going, but in the end it gave me an entirely different perspective of the piece. I was able to view the novel as a whole so much more easily than I had when I was writing originally. My agent queries, including my descriptive paragraph, and my one sentence pitch, came so much more easily after that work. In the end, rewriting was both liberating and exhilarating.
Now I'm working on my second novel. And I can't wait to get to the rewrites!
Good luck to you!