Coco, first you want to make sure that you have Show All Hidden Folders selected in your Windows Explorer Options. Then you want to go to
c:/Documents and Settings>All Users>Application Data>Adobe>Photoshop Elements> 5.0>Photo Creations>Special Effects.
There you want to make a new folder for the action. The unzip the action and extract it to this folder.
(This is assuming you are using Windows XP, should have asked that too)
Some actions in PSE5 do not show the thumbnail in Editor.
The best way to install actions, styles, etc into PSE5 is to get Graffi's Add-o-Matic. It is well worth it and you just drag your unzipped action, etc to the Add-o-Matic and is does the work for you.