I'm a new DNN user and am experiencing a similar problem - same message as amit when I go to load the ZIP file using extensions installer. When I opened the ZIP file I have 2 package which appear to be identically named (one a ZIP file, one a folder). I have selected the ZIP file to install on DNN, and get the same message as amit. When I select skin it seem to load OK. When I go to Admin>Skins, the name of the skin appears. When selected I get a message that "No skin files exist in folder". I have tried to "Parse the Skin Package" and this makes no difference either. I'm stuck. Help!
I obviously screwed that up enough times, because now it works! It helps BIG TIME when you unzip the files before installation.
I'll be back with more stupid questions later on - watch this space!