That might be the problem right there, if you are using the selection to compile. I wouldn’t recommend doing that unless you are specifically trying to only compile a piece of your manuscript (like say, only the first and fifth essays). In general you can just leave the selector at the top of the Contents compile option pane to “Draft” (or whatever the master draft folder is called in your project). The way selection works in Scrivener is exclusive. If you select a folder, that does not automatically imply that its indented items will also be included. You can set it to work that way, but like I say, if you just want the whole Draft compiled, you might as well not worry about selecting things specifically.
Or, if you mean something else by selection, let me know. There are several ways to filter out portions of the draft.
All right, to the problem of titles and text: all of this is controlled in the Formatting compile option pane, as Robert mentioned. Go ahead and click there in the compile sidebar and examine the grid in the top half. The checkboxes determine what will be exported for each type of icon. I can’t say precisely what you’ll see here, but a common scenario is for folders to export their titles, but nothing else, whereas text files may export both at level one (which means directly beneath the master Draft folder, not indented beneath folders), but only text at level two or greater. This way you can have single-file sections like a Preface that print both the title and the text from a file, but the files inside folders go on acting more like sub-components of the chapter—this lets you write and organise your work into smaller chunks than are worth distinction to the reader.
If the checkboxes in the upper half of the Formatting pane look right, and everything is listed in the Contents pane that you want listed, then you should be okay for titles and text. You may want to tweak the output for titles though, as it sounds like you’ve started with a template that assumes you’ll be writing a book with chapters, rather than a collection of essays. If you click on the Folder row in the top half, you should see a preview of what the title will appear like in the bottom half. To change the content of the title, click the Section Layout… button. The rest should be self-explanatory—basically the prefix gets inserted before the name of the folder, the suffix after, or if the title checkbox is disabled, these fields can print data anyway, making it possible to print generic titles like “Chapter One” without any names.
In short, there is no need to go back and redo your entire binder layout from what I’m hearing. The compiler is quite flexible and can work with just about any outline scheme. It just sounds like the compiler needs to be adjusted a bit, as described.
(And for future reference, if you’re just going to have major sections composed of a single file, it might be easier to just have a flat list of files in the Draft, rather than sorting one single file into one single folder like that. It will make working with the outline much easier for you, as you can get a quick overview of all your sections from the Corkboard/Outliner, and just overall have less clutter in your work space. But like I say, there is no need to waste a bunch of time doing that right now, the compiler can most likely be tuned to work with what you’ve already got.)
Check the Transformations compile option pane. There is a checkbox in there for conversion of italics to underscore.
You don’t need a front matter folder unless you intend to be switching front matter frequently. For example if someone is self-publishing to PDF, Amazon and Barnes & Noble, they might need entirely different title pages, copyright pages and so on. Front matter makes it easy to switch these on the fly whenever you compile. If you just have one title page, introduction, dedication page and all that, you can just create these as individual files in your Draft in the order they should appear.
Note that to create a page break, you’ll want to open the Inspector and check off the “Page Break Before” box. This will cause the current section to emit a page break—useful for most front matter sections. (By default, folders automatically get a page break, as set in the Separators pane). One other checkbox that will be of interest to you is the “Compile As-Is” flag. You’ll need that for any section that shouldn’t have a title but otherwise would. For example you would not want your title page file to be itself titled—you just want it to print precisely as-is.
That’s probably a lot to digest, so let us know if anything requires more explanation or screenshots.