I basically came here with the same question as the OP. After multiple re-installs and double/triple checking that i was following the instructions correctly I also wasnt seeing that I was using this mod in the menu screen.
And yes, the source of the confusion is in the language that specifically says to DISABLE "Do not automatically update this game". It is basically a double negative and should be changed on the webpage and in the readme notes. Steam has a drop-down choice of two options: 1. "Automatically update this game" and 2. "Do not automatically update this game". Telling people to disable the second choice leads many people to think the first one is the choice to make since there are no check boxes to enable/disable something. Instead just change DISABLE to CHOOSE and it should clear it up for most of this confusion. I use W7 and Steam so I only made the initial mistake be not going into steamapps, every mistake after that was due to the word DISABLE.
I only learned this after more than 3 hours of trying to install/uninstall using these directions before finding this topic in a search. I almost said 'screw it' to ever playing this game again based on that frustration. But now Im embarking on the lost content to relive some fun I had a few years ago with this game. Thanks for all the effort behind this mod, regardless of the this frustration.
Jimbeaux