Yes, Munich malt needs to be mashed. The rest don't. My concern is that 2 gallons of water is a lot for 18 ounces of malt, and the pH might not drop into the right range for mashing depending on your water. Then again, crystal and the dark malts are pretty acidic so it could be fine.
I'm assuming you've never had your water tested, but if you go to the water company website then you should be able to look up a water report.
That said, you can just follow their directions and see how it turns out, then worry about water chemistry some other time (or not at all).
At this point, the biggest thing you can do to make better beer is to control your fermentation temperature. Whatever the recommended range is for the yeast they supplied, go on the low end. Also keep in mind that fermentation will warm it up, so you want ambient to be cooler than your desired fermentation temp. This is very easy to do cheaply, as long as you plan ahead.