Do I need to compile iptables into the kernel?
Iptables can either be compiled into the kernel or as a modules, it does not really matter. If some of the modules are missing, then respective feature won’t work and you will get an error trying to load generates script. For example, if you compile everything into the kernel and leave ipt_LOG module out, then logging will stop working and you will get errors trying to load rules with logging turned on. Look into iptables HOWTO and Tutorial for more details as this problem is not really specific to Firewall Builder.