I've checked the Vulgate and the LXX (unfortunately, my education is deficient when it comes to Hebrew so that's as close to the original as I can get).
Deus stetit in synagoga deorum in medio autem Deus deiudicat
ὁ θεὸς ἔστη ἐν συναγωγῇ θεῶν ἐν μέσῳ δὲ θεοὺς διακρίνει
Both the Latin and Greek are structurally very similar (which shouldn't surprise; St. Jerome would have been using the LXX as his primary reference). Both refer to a "synagogue" of gods. I don't believe that's meant as a reference to a Jewish house of worship; although synagogues would have been extant in Jerome's time. Rather, it's a Greek word referring to a place where people are "brought together", i.e. a meeting place. The conference room in your office might have been called a "synagogue" in Koine Greek.
So the translation looks pretty good to me, so far as my own skills go.
It seems to me there are two things going on here to consider.
First, the Tanakh (it's always struck me as rather disrespectful to refer to the Jewish Scriptures as the Old Testament) in many places seems quite prepared to admit to the existence of other gods. It does not deny them, but merely states that the Lord supersedes them. This psalm would appear to adopt that point of view.
This interpretation has entered into modern Christian theology not in the sense that people actually worship Ba'al or Osiris or Jupiter or what have you, but rather build their lives around money or sex or family or politics or some other facet of life. This sort of thinking is even useful for atheists, in the sense that it encourages you to think about what is essential and what is a distraction.
But the other thought is that the ancient world did indeed have people who were gods. Some formally so (think of the Pharoahs). But all of us have gods, entities who hold power over us, we must propitiate in order to make our way through life. Consider how you've go to suck up to your boss at work. Or how the bank needs its monthly "sacrifice" or else it will take your home.
This psalm reminds those lesser gods not to get above themselves too. They must act with justice, but also with mercy and compassion for the weak and poor. Something to bear in mind next time you are given authority over someone else.