How do people make fried onions as an ingredient as opposed to a snack? Should I coat them with flour, milk, and spices

I own the same book and was similarly surprised when I read that instruction, but in the section on ingredients, the author does mention a particular variety of onions called pink onions. The mention is on pg. 32, and there is a picture of a pink onion on the upper left of pg. 34.

Here's an excerpt from pg. 32:

"The longer the onions are fried, the browner they will get and the deeper the color of the curry will be... When the onions are fried until only light pink in color, they will impart a sweetish taste to the curry. Certain varieties of onion, like Spanish onions, are too sweet to be appropriate for curry-making. The most appropriate from the taste point of view are the French and the small pink English."

From 50 great curries of india

I've never seen pink onions in any of the local markets (in northwestern US), I used white onions and sauteed them just to the point of browning. The recipe turned out fine, but it's a lot of onion. (The recipe calls for 2 large onions, finely chopped. It's a recipe that produces 2 servings.) Personally, I'd go a little lighter on the amount of onion or use yellow onions (despite the author's recommendation against Spanish onions), but that is just personal preference from a Western palate.

Note: it looks like the current printing of the book is different from the one I own, so the page numbers I cite may be off, but if you search inside the book (on Amazon) for "pink onion" you can see the page I've cited and the picture of what the author calls a pink onion.

The temperature you eventually set for your your pan depends entirely on the amount of effort you are going to put into stirring the onions & the amount of patience you have before considering them 'done'.
Sweating down onions properly can take half an hour, not the 5 minutes most recipes assume you have the patience for.

1. Firstly, not all onions are the same - they vary in water content dramatically, so you need to modify your method to account for this.

2. Secondly, not all pans are the same - more modification to suit.

3. Thirdly, burners - you guessed it - not all burners are the same...

So, starting from that randomness,

• Use a good slug or three of oil.

• Heat your pan to almost smoking hot

• Drop your onions

• Stir & keep stirring, until the sizzle starts to fade
  This gets some heat into the onion quickly but requires your constant attention.

• Drop the heat to maybe ¼

• Stir every couple of minutes.

• If you can still hear 'crackle' drop the heat some more.
  This is the difference between 'frying' & 'sweating' - if they're still crackling, they're frying; frying makes them brown [& eventually black], sweating doesn't. Sweating will eventually make them 'golden brown' which is a whole different taste.
  [This is moisture- & heat-dependant, see points 1, 2 & 3 Really wet onions you have trouble getting to fry at all, dry ones will burn as soon as look at them.]

• Once the onions have reached the same temperature as the pan & are no longer fully sizzling, then you can relax a bit & get on with something else.

Once you've got the water content, heat & oil combo just right, you can sweat them like this for as long as you like & they won't burn.
They will eventually caramelise, but they won't burn so long as you stir them every few minutes.
The time between those 'few minutes' depends on those three factors & your impatience to get this part over with & on to the next bit.

Alternatively...

If you're impatient & want it done in 5 minutes, then you keep the heat up high & you keep those onions moving constantly.
The result will not be as sweet, but is a reasonable approximation.

Doing it this way, if you turn your back or even blink too long, they will burn underneath whilst still being underdone on top.
This is generally only considered even vaguely edible if you run a midnight hot-dog stand for the less-discerning diner stumbling out of a night club ;)