I can't really tell what's going on from that video alone but creating way borders just tells the player where he can & can not walk.
If you add something to the scene; like that red thing in your video then you have to work out the object center which determines whether character will walk in front of the object or behind it, based on the characters current y position.
Also you have to make sure all objects are ordered correctly by their object center or certain strange bugs can occur; organizing is quick & simple - on the scene toolbar at the top is an icon with 2 yellow arrows next to a larger green arrow - click the yellow arrow icon to automatically order the objects based on their object center.
Also the characters current position is based on the character center which you have to manually set; which should be somewhere near the base (bottom) of the character & usually placed in between the characters legs. if you have set the characters center higher up then that could be why the character seems to be walking over the top of the building etc.
I can't really say based on the one screenshot alone.
* edit: In regards to the way points; as Simon as mentioned they are really just to tailor the route/path your character will take to get from point a to point b ... but you have to think carefully when adding them as you could end up with your character taking a bizarre path to get to his destination.
Also for scaling you can create way path points outside of the border also, just for setting character scale value to them.
Currently scaling on the x axis doesn't work so well in comparison to the y axis (just letting you know)