In context of VR, yes. This kind of screen-space (overlay) UI does not work. Instead UI elements have to be spatial.
There are many existing resources about the theory behind UI design in VR. Especially the distinction between diegetic, non-diegetic, spatial and meta UIs is important to understand for designers and developers. It’s from Beyond the HUD – User Interfaces for Increased Player Immersion in FPS Games.
Yes, that is the usual approach for implementing basic spatial UIs.
A few online resource about that topic:
From a development perspective, you maybe want to start from this topic: