Yes, it's a lot of paths to decipher and keep straight.
The root folder is the location of the ColdFusion server.
The web root is the location of the web root of the ColdFusion server. You place all the files a user (or browser) will request over the internet in this folder (or a subfolder). This includes ColdFusion files and the Flex application files (SWFs) that access ColdFusion files. Flash Builder needs to know this location so it can automatically save the files for the Flex application on the server when it creates them (this includes the SWF and accompanying files discussed in the Deploying the application tutorial).
The root url is the URL to access the ColdFusion server web root in a browser window. This is the URL you enter in a browser window to browse content on the ColdFusion server. Flash Builder needs to know this so when you run the application from Flash Builder, it launches the appropriate URL for your application in a web browser.
The Workspace directory is the directory where Flash Builder (Eclipse) stores its metadata for working with a set of projects. If you have hidden files turned on for you operating system, you will see a .metadata file. When you start Flash Builder, it loads this file and sets up Flash Builder according to this metadata including what projects to include, whether the projects are open or closed, and any settings you set with Window > Preferences. This is usually a local directory, NOT a directory on the server. The source files for your Flex application are stored locally, the compiled files are stored on the ColdFusion server.
The project directory is the directory where you store your project's source files and the Flash Builder metadata about the project (what you set for the project settings and so on). This is also usually a local directory, NOT a directory on the server. This folder does not have to be a subdirectory of the workspace directory, but often is.
Some example values:
ColdFusion root folder: /Applications/ColdFusion9
Web root: /Applications/ColdFusion9/wwwroot
Root URL: http://localhost:8500/
Output folder: /Applications/ColdFusion9/wwwroot/TestDrive/TestDrive-debug
Workspace directory: /Users/username/Documents/Flex projects/
Project directory: /Users/username/Documents/Flex projects/Flex4TestDrive/TestDrive_build_app_CF
Hope that helps!