I'd like to know if the File/directory input app actually indexes each conf file it monitors so that I can search it and see what specifically was changed? or does it just ingest the metadata (time/date etc) for the files so you that they changed but not what actually changed?
No it doesn't index the file itself. You don't need an app for that since Splunk is more than capable of doing this out of the box.
Instead, the app just indexes the metadata.