Need help with 2.5.4

I just downloaded 2.5.4 – running wp v2.9.2 – Having trouble with widgets.

When I activated the theme, it prompted me to change widgets, which I did and saved. Then when I look at the home page, nothing changed? Looks like a default sidebar.

I deactivated all plugins, so that isn’t it. There does not seem to be any way to turn off preset mode? Looks like a nice theme otherwise.

Could you advise how to fix? Thanks!