...Should all these .dat files be in the root (not design) directory? They look a little suspicious to me.
Yes, the *.dat files should be in only in design (*.dsn) folders, except for the Item & Items.dat(s) which you might find in a design folder but also in the DISK1 folder. The DRAW****.lbm(s) and .pcx(s) are belong in the ART folder.
Unfortunately, it does appear that UAShell was improperly installed.

After a successful installation, your main FRUA folder should include (more or less):
CKIT.EXE
INSTALL.EXE
ISETUP.INI
README.BAT
SOUND.EXE
START.BAT
START.DAT
UAHELP.TXT
UASHELL.BAT
-----and also these folders>
ART
DEFAULT.DSN
DISK1
DISK2
DISK3
DOCS
DOWNLOAD
HEIRS.DSN
PROGRAMS
TEMP
TUTORIAL.DSN
WORKING
I know this can be very frustrating, OutoftheBlue, but I really hope you won't give up. It's well worth it to get to the other side and be able to enjoy the many hacked mods our community has produced. And we're always here to help, even if it may take a little while for someone with the answer you seek to visit and see your question...