Did you use Clockwork or SPRecovery? You need to use SPRecovery.
uhh unless something is specifically in the file that needs sprecovery then no, no you don't. you also don't need to rename to update.zip for it either. you just browse to the zip file and tada.
the issue is the constant changing of roms and themes are not keeping up. theming froyo seems to be a bit hit and miss atm.
I don't see this obsession with sprecovery. It's not a bad recovery, but whats the newest version? .993b or whatever from when sholes was around? that's pretty old.