The initial shading groups are just the defaults created for a new scene, and lambert1 is the default shader under said groups.
Your lambert2 has it's own shading group so it doesn't need the initial groups.
The flat shading is as it should be; it's a lambert material, i.e a flat shader with shadows.
Your normal map has quite a few dodgy areas which are usually a result of an overlapping cage or a cage that doesn't completely fit the model when you bake. you can just edit those bits out using the flat normal map colour which is rgb 128,128,255.
The detail parts also aren't very strong. You can increase bump strength in the bump2d node.
If you use photoshop CS6 or below, i would suggest downloading the free Nvidia normal map filter plugin for photoshop and watching a tut for the basics. It has an option to normalise an image to match the rgb range limits for each channel if they fall outside the required values for a normal map.
So you can, say, duplicate your normal map, blur it, reapply a normal map conversion via the same plugin with a larger sample size, change the layer style to overlay, flatten it to the original, then normalise, and have a more pronounced result with less noisy bumps.