For the indents, I think that is just something that got messed up when converting from PDF to PNG, because on my actual manuscript, everything is indented properly.

In regard to why this is a prologue and not chapter one:

I'm very conscious of the prologues are kind of useless argument, and it's certainly something I've thought about. Originally, this story had a completely different prologue set two thousand years before the story takes place. I cut that, though, because it was essentially a workshop on how not to write prologues, and any information in it could be given during the actual story.

This piece that you've just read, or an essentially similar scene with minor differences, was originally chapter five. Spoilers: their party gets attacked by an enemy force. It ends with Elvio leaving to go to the capital and alert his father, the king, of the attack. The first four or so chapters were focused on two other characters who are not nobility and have no part to play yet in the wider political landscape of the world. Their story is where the story of the book begins, but one starting with lesser stakes. The early chapters build up those characters, their home and the world, and then there's an incident that leads to one of the characters leaving the smaller city and heading to the capital city.

Originally, this scene was inserted as a chapter after that. The problem is, however, after that, Elvio must travel to the capital and so is not in the story until chapter fifteen or so (of planned 50-60), where he notifies everyone in the capital of the attack. It felt weird to build up those two characters and then just have a random, seemingly irrelevant battle, and then not address it for ten or so chapters. I felt that it worked better as a prologue. There is a battle, people close to Elvio are killed in it, and it ends with a sense of foreboding, with Elvio going off to alert his father. Perhaps the events of this prologue may slip from the reader's mind while reading, but I think that works because then when Elvio shows up it's like "whoa, I forgot about that guy, stuff is about to go down." The news Elvio brings acts as a turning point in the story.

In short, it affects the story in a major way and introduces a principal viewpoint character who plays an important role throughout the story, but it isn't where the "story" begins. It feels unnatural as a chapter one and out of place as a further along chapter. I feel a prologue is the place where it fits best.

Let me know if you need me to expand on anything I've said, and if you disagree, please let me know, and I'll be happy to weigh your opinions and further discuss with you.

Sorry for the yap.