My primary use of my camera is for family videos (kids)
I have wanted to upgrade the on camera mic for some time. So I finally got it ordered.

Canon XHA1
Rode Sm5 to mount to my camera
Rode NGT2
And a dead cat

I bought a short XLR cord to connect to my camera.
This is on Channel 1

My on camera mic used Channels 1 and 2, this mic is 1 only Is this correct?
I was planning on just using this in the auto mode. Is there any compensation I should look at doing?

"My on camera mic used Channels 1 and 2, this mic is 1 only Is this correct?"

Yes the Rode NTG2 is a monaural microphone. So you would plug it into either the Left or Right mic inputs. Your camera may have independent switching on each channel to use either the built-in mic, or whatever is plugged into the XLR connectors. So you could switch the Left channel to use the NTG2 and the leave the Right channel using the built-in mic.

"I was planning on just using this in the auto mode. Is there any compensation I should look at doing?"

Not sure what "compensation" would be desirable (or possible)?