Ah sorry, this should be better documented. What you describe should work, but more commonly the outermost jupyter.sh doesn't need to be edited at all, in which case you should just use metadata variables to point at your github fork and branch that you're developing against. For example, in #103 I tested against the pull request's source with:

gcloud dataproc clusters create dhuo-jupyter-fixed \
    --initialization-actions gs://dataproc-initialization-actions/jupyter/jupyter.sh \
    --metadata "INIT_ACTIONS_REPO=https://github.com/bomboradata/dataproc-initialization-actions.git,INIT_ACTIONS_BRANCH=fix-jupyter-5.0.0-config-and-launch"

Tested with:

gcloud dataproc clusters create sgmc-jupyter
--initialization-actions gs://dataproc-initialization-actions/jupyter/jupyter.sh
--metadata "INIT_ACTIONS_REPO=https://github.com/sammcveety/dataproc-initialization-actions.git,INIT_ACTIONS_BRANCH=add_jupyter_autostart"
--zone us-central1-b

Thanks, LGTM!