Tammy, Yes, the surround sits on the tub. As for the gap between the bottom of the greenboard and the top of the tub (I'm guessing that this is about 1/2 inch or so); if the surround material is fairly rigid, don't worry about it, just caulk the joint between the tub and the surround. If the surround material is not very rigid then, before you set the panels, lay a nice heavy bead of caulk around the top of the tub about where the bottom of the surround will sit. Install the panels, being careful not to push back on the bottom edge of the panels too much. Wipe off the excess caulk along the bottom, again, being careful not to press too much on the bottom edge. Let everything dry 24 hours. This will firm-up the bottom edge of the surround. Then go back and do your finish caulking along the bottom edge and at the panel joints.