i had the same problem, found this thread and i think i figured it out. well, at least it works for me.
in the widget.zip you find 2 folders. one named classic, one named default. each folder contains two files:
a) functions.php and b) sidebar.php
move functions.php and sidebar.php from the classic folder to /wp-content/themes/classic/
move functions.php and sidebar.php from the default folder to /wp-content/themes/default/
go to your admin panel and change your default theme to either wordpress classic 1.5 or to wordpress default 1.6
you should see the new widget menu then.
for all the people who don’t want to use the classic or default theme, it’s at least a way to see if it’s “only” a template problem or a system problem.
