Agreed that it isn't the best of manuals!
When set up for screwcutting, the leadscrew can be disengaged by means of the lever on the front on the headstock, the same lever that engages/disengages the fine feeds for surfacing. So no, it isn't engaged all the time, but it is either surfacing or screwcutting.
Assuming you are set up for surfacing, then if you dismantle the large changewheel and three-step device, you will find a small T-nut on the end. You should have another two of these. Whilst dismantled, you will find a bronze stepped sleeve: this is used purely for that particular position, probably owing to the restricted diameter through the three-step device. The plain sleeve(s) you will need are the same length and internal diameter, but without a step so the external diameter is the same as the larger of the two diameters. I think you need two but at the moment am not sure.
If you dismantle the large disc, you will find a long T nut with a screw and locking nut on one end. For screwcutting this has to be replaced with a short T nut.
From memory, ie it means going into the garage and having a look, and it's too late for that now, you should also have a special 32 teeth changewheel along with nut, sleeve (possibly) and bolt. These are used for left hand screwcutting.
You should also have at least one each of a spacer about the thickness of one change wheel, and one about the thickness of two changewheels.
I'm sorry to say that if you haven't got these, then you are going to be on a hiding to nothing as you will need to source them from somewhere. I'm assuming you bought the lathe s/h, so it might be an idea to go back to the seller and see if they are available.
Good luck.
Peter