We accept ships (and boats) of all types here!
The cylinder is a piece of "stretched sprue", and the diagram to the left of it is showing you one way to make it - basically, heat up a piece of the plastic sprue until it's soft, then stretch so it's thin. Cut out to make the cylinder. Another (better) way is to heat only one end of the sprue until soft, stab it down on a surface, and pull.
The purpose of this cylinder is so your rigging ("string") can't come back through the hole in the deck. A less messy way to do it is it simply tie a large knot, or just glue the string's end to the under side of the deck.
The "I" piece is just showing you the midpoint where they recommend you locate the cylinder - notice in step 8 on that page that the I length of rigging is used. Unlike the other pieces of rigging, the cylinder is located at the midpoint, rather than the end, of the rigging piece.
The rigging is not shown in subsequent instructions for clarity's sake. Look through the rest of the booklet and it should tell you how the lines should attach to masts and funnels.
But that's for a regular "out of the box" build of the model. In real life, the rigging does not actually go through holes in the deck, but are usually attached to eyelets and other small fittings on top of the deck.
If you want it to be more accurate, you can check out the Titanic Modelling Association's webpage:
http://titanic-model.com/ They have a section dedicated to rigging
here.