As long as your source drive is the same size as your destination drive then even if you use a larger intermediate drive, it will still work fine no problems. So in the case of using an intermediate drive as you are, you copy(ddrescue), from source to intermediate and then another ddrescue command copying from intermediate to destination. And regardless of intermediate drive or not, I suggest in this day and age and even well over a decade before it, adding -b 1M (similar with dd), to speed up the copying so ddrescue doesn't default to its stoneage default of a 512 byte buffer. Here are some example usages GNU ddrescue - can someone give me a good command to run in terminal? but yours seem fine just add a -b 1M to what you have, for speed.
I'd guess that it will copy bit for bit everything from source to dest until it reaches the end of source or dest, then it will stop the copy completely. In the case of copying where src=your big intermediate drive, onto dest, your src disk is bigger than your dest disk. It will stop at the end of your dest disk. And that should be fine 'cos that's everything you want from your src disk anyway. And the stuff on your src disk(intermediate disk) is built to work on your dest disk(a disk that size), so i'd guess with my almost zero expertise so FWIW, that it should work nicely. (aside from any data corruption from your old bad disk)
You may find this of interest too https://askubuntu.com/questions/194962/mounting-ddrescue-image-after-recovery-in-over-my-head or anything about reading an image before even writing to a drive.
But just try it and see. I think you'll find that your copy, originalsrc to intermediate , and intermediate to dest, where src and dest are the same size and intermediate is big, will work fine. And ddrescue does provide a progress bar, which is good.