Whenever I am adding transistors to my design with the device toolbar it is generating separate .mag files for every transistor I add. Is this desired behavior / should I flatten everything before saving or something?

No, that is the desired behavior. I am thinking of modifying magic so that it can save those cells by parameter and regenerate them on input rather than saving a file for each one, but I haven't done that yet. If you have excess .mag files that are unused and left over after changing parameters and re-saving a layout, I have a script to clean those up.