How are type ratings created for new aircraft types?
Seems you guessed right, actually.  FSIMS 5.9.3 does indicate that you can get a letter of authorization in lieu of a type rating:


  B.    Requirements for Aircraft Undergoing Certification. During the type certification process, it is sometimes necessary for industry pilots or FAA inspectors with airman certification responsibility to be qualified in a particular aircraft before a pilot certificate type rating designator is established for that aircraft. In these circumstances, and at the discretion of the manager of the aircraft evaluation group (AEG), an LOA (Figure 5-187) may be issued in lieu of a type rating. This LOA and Letter of Application (Figure 5-188) must be in the pilot’s possession when exercising the authorized privileges. The LOA can eventually be surrendered to a district office in exchange for a temporary airman certificate bearing the category, class, and type ratings.