In any given mission, there can never be more ships flying than you have onboard - suppose for example that you have a mission where your wing of 3 Gladii goes on a strike against an enemy capship, with two wings of 3 Stilettos as escorts. If you have more than 3 Gladii and 6 Stilettos, everything will be fine. But if you only have 4 Stilettos, you will only have 4 escorts instead of 6. Similarly, if you only have 1 Gladii... you will be the only bomber flying the mission.
In general, if you run out of ships, the game will end - this was possible in the first episode, where losing too many ships resulted in the Lionheart retreating. In the subsequent episodes, because you have a bigger fighter compliment, it's usually nearly impossible to run out of ships completely, especially since later on, there will be more and more ship selection missions (so, for example, even if you've lost all your Sabres, you might still have enough Crossbows to fly the mission...)... at the same time, even if you can't run out of ships completely, it certainly will be quite an inconvenience to fly against the Kilrathi fleet with only half the escorts that you should have
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As for ship selection - it works exactly the way you've seen it work in episode one. That is, on missions where we want you to be able to choose between ships, you'll be presented with a choice. This does not happen with every mission, however - in episode two, for example, there is not a single mission with ship selection, and in episode three only about half of the missions will offer a ship choice.
