Please note that you can leave this file zipped if you so choose.
Just put it in the folder named "ss1" which should be inside the folder named "fam" in your main SS2 folder.

If no "ss1" folder exists (or "fam" for that matter), you'll need to get the SS1 textures. The easiest way would be to download "ss1tex.zip" which should be available wherever you got this file.

Have fun.
