http://www.gradle.org/build_lifecycle.html

Unnecessary comma
Later in this chapter we explain, how Gradle looks for a settings file.

Confusing/Inconsistent message
You only need to specify the leafs of the tree. Each parent path of the leaf project is assumed to be another subproject which obeys to the physical path assumption described above.

However, the example above is:
include 'project1', 'project2', 'project2:child1'

In this example, project2 is not a leaf node in your hierarchy.

You might consider replacing project2:child with project3:child.

Confusing Text
Example 237. Flat layout
settings.gradle
includeFlat 'project3', 'project4'
The includeFlat method takes directory names as an argument. Those directories need to exist at the same level as the root project directory. The location of those directories are considered as child projects of the root project in the virtual multi-project tree.
If those directories exist at the same level, does that mean they are sibling directories? that is, in this example...
~/src
root
project3
project4

Or do you mean
~/src
root
project3
project4

The second example seems to be the "include" example. However, with a little experimentation, it appears as if include and includeFlat both work for the example:
~/src
jjj
projectA

But then it turns out that this also works:
~/src
jjj
projectA

So maybe consider using the word "sibling". In any case, I was surprised that includeFlat found directories UNDER the root directory as well as siblings to it. I think this could be considered a minor defect as it muddies the issue a bit - on the other hand, it is convenient. But I worry about convenient stuff getting out of hand.