Steven Zahm@ Jenna
The Form extension does not create users. What you need to do is setup a process in which a user registers with the site. You can opt to use the WP built in user registration process or another plugin which handles user registration. These type of plugins really are just using the builtin WP registration process too though they may add features such as using a custom page.
I think where you are getting confused is that Form can be used independently from Link to allow anonymous submission into the directory.
What you need to do is remove the the “Submit New Entry” action link and enable the “View My Directory Entry” option. If a user does not yet have an entry in the directory, they will instead see an “Add My Directory Entry” link.
Hope this helps, let me know.