It took me a while to figure some of this out, so I thought I would share it for anyone else who might be trying to figure out crafting.
You can sort gathered materials. If you open up your resource bar, and right click a resource, it appears on your back. Open up your equipment window, and you will see what you're holding in the bottom row. Right click the resource, and select yes. Note - you must have 4 open inventory spaces! You will get some random items. This is where you will get the basic items for crafting, like wool scraps or screws.
To craft -
When you open up the craft UI, you will see a list of the items you can make. Click one, and it will show you the tools and mats you need.
In order to craft, you must actually drag the material from your bag into the craft box. If an item needs thread, any kind of thread will do (I assume this is the case with everything, like cloth means any cloth). So if you have wool scraps, make wool thread, then drag the wool thread onto the thread icon in the recipe. If you have cotton scraps, make cotton threads, etc.
I will take screenshots if this isn't clear, and someone wants them. Hope it helps!
A super special thanks to Celestial Fury, who helped lead me from the mountains to the junk piles!!!