Munich malt technically is a base malt. It needs to be mashed, and has enough diastatic power to convert itself. That is what makes this a mini mash recipe.
You can do the mash the same way you normally steep your grains. The only difference is you need to keep your temp in the 147-160 degree range, and let it sit for 45-60 minutes. You're using such a small amount of grain for fermentables that your temps do not need to be as precise as most mashes for body and mouthfeel. You just need to keep it in range for conversion to take place.
You don't really need the flaked barley in this. The crystal malt used in amber extract, along with the additional pound used in the mini mash, provides plenty of body to the beer. Also at this point I use one pound of canned pumpkin instead of going through all of the trouble of roasting fresh ones. I've noticed no difference whatsoever in flavor, so I don't bother going through the extra trouble.