When you place the first balloon, or place the first Parts List on a drawing, you get the option for "Structured" or "Parts Only" BOM Settings. In your first image (where all the parts are Item 1) you've used "Structured". The reason everything is Item 1 is because you have a parent assembly with a Frame subassembly - and according to the Parent assembly, the Frame subassembly is Item 1. Therefore, wherever you place the balloon on that subassembly, you should get the same number. If you go to the BOM Editor and right-click the "Structured" tab, you'll find an option for "First Level" or "All Levels". You have "First Level" selected, therefore all parts in that subassembly will be given the same item number. Set it to "All Levels, you'll see the drawing's Item numbers change to 1.1, 1.2, 1.3 etc.
If you use Parts Only (as you did in your second image) - that's where you'd expect to see individual item numbers for all "Parts" (as the name suggests). What you are possibly missing is the setting in your Bill of Material that groups "identical" frame members. See "Part Number Row Merge":

(You can see the three Qty columns here as described by @YannickEnrico 👍)
A word of caution here: Part Number row merging just merges the Parts if it sees the Part Number iProperties are identical. Frame Generator typically creates a Part Number containing the section shape and cut length (G_L). Therefore, the default behaviour will group same section + same length, so you can run into problems is when multiple parts are the same section and length but have a different hole pattern in them.
Once you have Row Merging enabled, you should find your Parts List updates correctly.
You're right about notching - especially with "C" sections and "I" sections, but you're using the "Basic Notch" function which simply subtracts one profile from the other. Use a "Custom" notch profile to get the result you need:

When I first started using Frame Generator, I did wonder about the apparently limited notching capabilities but having worked for a few companies who all notch differently (in the workshop), I can see why there's no "one size fits all" solution to getting it right.
As for cut lengths: They are correct 99% of the time. @YannickEnrico was correct regarding two cuts on one end of a frame member and G_L only reporting the first - but that was fixed a few releases ago and it works fine in 2024. For the notched members however, I use a very short iLogic routine to calculate the finished length of the part. Happy to share it if you want it.
I also notice your Parts List is showing cut lengths to 3 decimal places. You either have a very good workshop, or they haven't come back to you complaining about it yet. There's a post over here that shows you how to make it right: Frame Generator Cut List - Item, Merged, Grouping, Equations, etc. - Autodesk Community - Inventor
Peter