Help understanding how to decrypt cipher
You don't start by manipulating the last byte of the first block. Rather you manipulate the last byte of the last block. You start at the end and work backwards. The side-channel leak in the padding oracle attack is that the server distinguishes between a bad cipher and bad padding. This is the leak that lets you figure out the message. 

If you try every possibility for the last byte, the server will tell you if the padding is bad. If you get no "bad padding" error you know the value you tried is likely 1 xor'd with what will decrypt the last byte of the actual message. So then you try changing the last two values to get "2" and "2". You already know to xor 2 with the last value at the end that gave no bad padding error. So it's a matter of figuring out the second to last byte and trying every byte until you get no padding error and so on. 

The best way to understand this that I know of is to do the cryptopals challenge (google it). It's also very helpful to look at a diagram of how CBC works because you can visualize what's happening.