if i recall i just used my landline number. i do recall the screen you are talking about, and while i cannot remember exactly what i needed to choose, i can affirmatively state that it will in fact work if you stumble on the correct settings. i know this simply because my phone these days is an old galaxy nexus with a bad esn that i cannot get cell service on, and i've been rocking google voice/hangouts without a glitch.
if you can get by the screen you are talking about....and you may need to access your voice account on the web and tweak settings, you should be able to get this going with some trial and error.
i too for awhile could make calls, but coulds not RECEIVE calls. had me befuddled for awhile. solution is:
on device...
hangouts>settings>account settings (click on your name/email account)>check "incoming phone calls"
hope this helps. i'm sort of sorry that i've wasted so much money on cell service in the past. this adequately gives me what i need for free.