"to make a scene" is an expression which comes from the idea of a scene in a play or a movie. It suggests that someone is overreacting, being unnecessarily dramatic or drawing a lot of attention to his- or herself.In this situation, "making a scene" about someone's misery might mean laughing about how sad he is, or maybe even making a big performance (another expression) by pretending to cry.
A "confrontation" is what happens between two people who are in conflict: either militarily or, more often, because of a clash of opinions or ideas. Here the confrontation is having to tell someone who's asking you out that you are not interested. "direct confrontation" can mean either that the confrontation is happening face-to-face, or simply that the disagreement is being explicitly stated, rather than being present as subtext.