how do you make new users that are able to login/ able to chat? I can only figure out how to login admin. please help.

FreiChatX doesn't include any user management system,
FreiChatX integrates with your existing website/users.
To login to your backend, go to yourdomain.com/freichat/administrator

So is there any certain session that needs to be set?

yes, if you don't use any PHP based software package(CMS/forum/blog), you can use the 'Custom' driver, you will find whatever you want in the freichat/arg.php file, Change the arguments according to the SESSION variables used in your site.