Flatten mapping is not the same as pelt mapping. It will separate edges from eachother and sometimes result in very crude UV's, and i would only recommend it for a limited ammount of situations.
UV'ing in 3ds max 5 will require you to separate the UV into separate pieces and project them from their best angle. Selecting a piece of UV mesh and pressing "D" will cause it to detach from the rest. After you've done this, while selected, go to the "mapping" tab and find your way to the list where it says stuff like "box mapping", "left/right", "front/back", etc. Experiment with the different methods to see what displays your detached piece best. You might want to plan in advance what directions you want your pieces to be mapped from, for instance, i myself usually map legs from left/right while i map the chest and arms from front/back. The head sometimes require a combination of the two were you need to stretch the side parts to fit with the center. Remember that you sometimes only need to texture the one half of the object, such as the left side of the chest, then you can select the one half and flip it onto the other. Do this using tools>flip horizontal/vertical.
The unwrap in your image is done using a newer kind of system called pelt mapping. It works by that you select what edges that you want as "seams" in your UV, and then use an automated program that stretches out the UV for you in the most accurate way given the seams you selected. It is only available in newer versions of 3ds max.
Finally, i'd like to give you some critisism on your model. The arms are waaaay to short, especially the wrists, they looks like stumps (arms should reach about halfway down the thigh). Also, the legs are too far between and the feet are a tad too small.