Forest can use splines or surfaces to define the scattering area. If you assign a surface, but not a spline then the items are distributed along the full surface.
So, the suggested workflow for a new object should be this:
1) Assign the spline as "Include" area -> the items are scattered inside the spline
2) Assign a surface -> the items are Z aligned with the surface
On the other side, the surfaces can work in two modes: XY or UV. The default mode is XY, and it is suggested for terrains. The UV mode is not compatible with areas, so probably this is the reason these option are disabled in your scene. You can see more information about the surface modes here:http://www.itoosoft.com/forestpack/reference/refsurface.php
Anyway, in this case i think the problem is that the spline is not closed, probably it has some open vertex. For open splines, Forest creates the distribution surrounding the shape (exactly the behaviour you get).