re: Against ‘Folk Scholarship’

We have recently wondered exactly how to and when to use final forms of Hebrew letters in acronyms (עכו”ם not ה”מ):
One of Hyehudi’s wise readers has presently offered us counsel:
When the acronym is pronounced like a word itself, e.g., “Rambam,” “Tanach,” use the final form of the letter. When the acronym is not pronounced as a new word, use the initial form.
  1. Nouns or concepts get finalized letters, phrases, however common, do not.
  2. The more commonly used acronyms get finalized letters, while all others do not.

The first one does seem better, right?