I bought this last week and also had Minecraft: Story Mode on disc. The disc has the first episode and season pass embedded in it. When you load the main menu, it connects to the servers to pull up the rest of the episodes, and they're all free because you have the season pass.
You download the remaining episodes through the disc, which brings up a hidden page on the playstation store. you'll get a purchase receipt email like any other DLC from PSN. These episodes DLC are not the same as the ones you can search on the PSN store, because when I go directly to store, it still shows $4.99 each.
You still need the disc inserted to play like any other physical copy, because the game data still needs that embedded key to say you're allowed to play it. Yes, you can buy it used.